In the coming 2021, Hong Kong stocks are among the worst performing stock markets in the world.
Misfortune is where good fortune depends, and good fortune is where misfortune lies. The worst performance may just mean opportunity.
As of December 31, 2021, the number of companies listed on the main board of the HKEx was 2218, the highest in nearly a decade, an increase of 48 from last year's 2170, but the market capitalization was 13% lower than last year, which means that the market capacity is expanding, but the valuation has not kept up.
As a matter of fact, the turnover of the main board of Hong Kong stocks in 2021 is the highest in a decade, an increase of more than 30% over 2020, which reflects that the activity of the market is on the rise, the valuation has failed to keep up or means that the market has been downgraded, and the market has become more rational.
Among the active turnover, Beishui, which enters the Hong Kong stock market through the Shanghai-Shenzhen-Hong Kong Stock Connect, is the main force.
In 2021, the total turnover of the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect surged 52 per cent and 90 per cent respectively from the previous year to HK $4.5 trillion and HK $4.85 trillion, a total of HK $9.34 trillion, an increase of 69 per cent over the same period last year, the highest since the launch of the Shanghai-Hong Kong Stock Connect in 2014 and the Shenzhen-Hong Kong Stock Connect in 2016.
The proportion of the turnover of North Water in the total turnover of Hong Kong shares on the main board has further increased from 21.39% in 2020 to 27.44%, as shown in the chart below.
It is worth noting, however, that in terms of net purchases minus sales, 2021 was the bleakest, at HK $117.9 billion, similar to HK $113 billion in 2018, when A-share trading sentiment was lacklustre throughout the year, as shown in the chart below.
This may mean that Beishui, which chooses to leave the field in 2021, is not low.
What did Beishui buy? What did you sell?
According to Wind, only retail and media showed a positive net inflow of North Water in 2021, with a net inflow of 158.821 billion yuan and 5.368 billion yuan, respectively. The leading enterprises in the retail industry include JD.com (09618.HK), Meituan-W (03690.HK), etc., and the media include China Literature (00772.HK), Ali Pictures (01060.HK) and so on.
The Hong Kong equity sector with the highest net outflow was the banking industry, with a net outflow of $567.2 billion, representing enterprises China Merchants Bank and Industrial and Commercial Bank of China; followed by food and retail, with a net outflow of $400.2 billion, mainly including NONGFU SPRING CO., LTD. (09633.HK) and 02020.HK; and software and services, with a net outflow of $273.8 billion, representing enterprises such as Tencent (00700.HK) and Kuaishou Technology-W (01024.HK).
In addition, the diversified financial industry and the precarious real estate industry represented by the Hong Kong Stock Exchange (00388.HK) and CITIC (06030.HK) are also industries with a higher net outflow.
In terms of individual stocks, Tencent and China Mobile Limited (00941.HK) and CNOOC (00883.HK), who are about to return to A-share listings, are the highest net buyers of shares to the south, with a combined net purchase of more than 200 billion yuan.
From the perspective of share price performance, China Mobile and CNOOC, which are about to return to A, are performing well, reflecting the expectations of mainland investors.
The most amazing performer was China Resources Power Holdings (00836.HK), which rose 2.39 times for the whole year, mainly because electricity consumption maintained strong growth this year. Shares with the concept of green power such as China Resources Power Holdings were highly sought after. Among the new energy generation stocks, 01811.HK and China Electric Power (02380.HK) also rose 6.45 times and 2.49 times respectively.
Shunyu Optics (02382.HK), which specializes in mobile phone and car lenses, is up 46.23% thanks to Apple Inc's concept, consumer electronics and auto consumption.
Although other shares were favored by Beishui, the performance of the stock price was not satisfactory, mainly due to the previous high valuation and the regulatory influence, which led to a substantial adjustment in the stock price during the period. Tencent, Kuaishou Technology, Smoore International Holdings Limited (06969.HK) and so on are typical examples.
The highest share sold by Nanxiang net is Meituan, which repeatedly reached record highs in 2020, but since 2021, the company has expanded the sinking market and invested heavily in new businesses such as community group buying, which has turned profits into losses, and it is time for adjustment.
Ganfeng Lithium (01772.HK) benefited from a good market in the lithium concept, up 33.03% year-to-date, and net sales at the top of the list could mean the withdrawal of profitable funds.
Ping An Insurance (02318.HK) and China Merchants Bank (03968.HK), two remarkable financial representative companies, have experienced ups and downs this year.
However, China Merchants Bank, affected by increased competition, has maintained a cumulative increase of 27.48 per cent, despite being unpopular with mainland investors.
Ping An Insurance is not so lucky. The ineffectiveness of life insurance reform and the frequent occurrence of real estate exposure risks have broken the hearts of mainland investors, causing many investors who have been waiting for many years to leave the market one after another. However, the year-end closing price has rebounded by 17.13% from its low of HK $47.94 in late September, which seems to have taken a turn for the better.
2022Outlook for the year: is it time to make a bottom?
The spray stirs up thousands of waves, but Hong Kong stocks are silently downstream.
In terms of trading volume, the amount of capital attracted by the Hong Kong stock market is increasing, at least the highest in a decade, but the performance of Hong Kong stocks is like a splash, sinking to the bottom before it blooms. The author believes that the reasons include:
1) from 2020 to mid-February 2021, Internet technology stocks in Hong Kong stocks have accumulated a certain bubble. When regulation landed in the middle of the year, high-level technology stocks fell, and as technology stocks accounted for an increasing proportion of Hong Kong stocks, the pullback of large-scale technology stocks has also led to a weakening of the overall market atmosphere.
- The release of cumulative risk. In addition to the bursting of the bubble accumulated by the large Internet technology stocks mentioned above, financial stocks with higher exposure to inner housing and real estate have also followed the policy to release risks, and these shares are an important component of Hong Kong stocks, further dragging down the performance of the market.
- The brilliant performance of the US stock market has led to the outflow of profit-seeking funds from the Asia-Pacific market.
- With the return of large-scale Chinese stocks, Unicorn chose the more convenient Hong Kong stock market as its main listing place, and the capacity of Hong Kong stocks continued to expand, while due to factors such as doubts about whether the regulatory dust had settled, capital nostalgia for the strong European and American markets, and other factors, the capital increment did not expand with the market capacity, resulting in a further decline in the valuations of many high-quality shares.
As a result, Hong Kong stocks are among the worst performers in the world. As can be seen from the chart below, the Hang Seng Index and the Hang Seng Biotechnology Index have fallen 14.08% and 32.70% for the whole year, far below the performance of A shares.
Based on the data of Wind, the author estimates the A-share premium rate of AH's synchronized listed shares. It is found that the average overall premium rate in 2021 has reached 121.30%, with a median of 101.38%, rising to a 10-year high, exceeding the premium rate during the bull market of A-shares in 2015, as shown in the chart below.
At the same time, the valuation of the price-to-earnings ratio of Hong Kong stocks has also dropped from 17.55 times in 2020 to 14.74 times in 2021, which is lower than 16.53 times of Shanghai A shares and 32.95 times of Shenzhen A shares. Both horizontal and vertical comparisons are at a reasonable level.
Therefore, the author believes that in 2022, with the implementation of the policy, the valuation of Hong Kong stocks which appear to be more ideal is expected to be consolidated.
Internet companies that do a good job of compliance and rectification in accordance with regulatory requirements may regain the favor of Beishui and regain their stability. after all, these Internet companies are the most familiar investment targets for mainland investors, coupled with the scarcity of not listing on the A-share market. more able to attract their attention.
In addition, as China Mobile and CNOOC return to A, the flow structure of North Water may change and will shift to shares that are not listed in A shares. Chinese stocks and unicorns, which are about to return to Hong Kong stock market, will also attract the attention of foreign investors and become the expected targets of "access".
As a result, artificial intelligence company Shang Tang-W (00020.HK) went public just before the end of 2021, with a cumulative increase of 42.86% in two days, and the market seems to have rekindled its enthusiasm for science and technology start-ups.
2022, something to look forward to.