HK - Market Strategy 03 (Dec 17 - Dec 25)

[winston]

Multi-billion US dollar exodus hits China ETFs

Outflows from US-listed emerging market ETFs that invest across developing nations, as well as those that target specific countries, totalled US$5.57bil in the week ended April 11, the most in a year.

Of that total, US$3.69bil came from China.

Meanwhile, Chinese ETFs listed on the mainland saw nearly US$24bil in net inflows last week, eclipsing a prior record of around US$23bil set in October, as state-backed funds purchased the products to support the stock market. —

Source: Bloomberg

https://www.thestar.com.my/business/bus ... china-etfs

[winston]

<Research>Daiwa: CN Mutual Funds' Allocation to HK Stocks Rises to 14.9% in 1Q, Setting New High, Expects Reinvestment in High-div. Stocks in Utilities/ Staples This Quarter

The allocation proportion of Chinese mutual funds to Hong Kong equities climbed to a new high, with redemption pressures easing significantly as the stock market rebounded and nonferrous metals, autos and media being the most favored sectors of the funds, Daiwa released a research report saying.

In contrast, Chinese mutual funds notably increased their positions in Hong Kong stocks in 1Q25, in line with the trend of significant southbound capital inflows into Hong Kong equities over the same period.

The proportion of Hong Kong stock shareholding to total heavyweight stock investment by mutual funds rose to an all-time high of 14.9% as of 1Q25, compared with 11% in 4Q24.

TENCENT (00700.HK) , BABA-W (09988.HK) and XIAOMI-W (01810.HK) have ranked among the top 10 heavyweight stocks list for equity-oriented mutual funds, while only two Hong Kong stocks, naming TENCENT and MEITUAN-W (03690.HK) were on the list in 4Q24.

The allocation proportion to non-ferrous metals also climbed by 1.3 ppts in 1Q24, thanks to soaring gold and copper prices. CHIFENG GOLD(600988.SH) , KUAISHOU-W (01024.HK) , BYD COMPANY (01211.HK) and SHANDONG GOLD(600547.SH) were among the top buys this quarter.

In the face of the rapid escalation of the US-China tariff war since April, mutual funds are expected to adopt a more balanced sector and market allocation strategy in the current quarter, with a possible pivot back to high-dividend stocks in utilities and staples, as well as the A-share market as a whole.

However, the broker believed that the expansion of Chinese mutual fund allocations to the Hong Kong stock market has been a long-term trend, mainly for investment portfolio diversification purposes.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

<Research>CICC: CN Public Equity Funds' HK Stock Position Ratio Hits New High in 1Q; TENCENT/ BABA/ SMIC/ Others Most Favored

Since the beginning of this year, China assets, especially the Hong Kong stock market, saw a wave of magnificent DeepSeek-induced narrative re-rating, with the HSTECH leapfrogging by more than 40%, according to CICC's research report.

As of the end of 1Q25, the proportion of public equity funds' Hong Kong stock positions in the market value of their equity investments had risen to 36.9%, the highest level in nearly 5 years, significantly higher than 30.5% at the end of 2024.

In terms of sector allocation, internet and semiconductors were most favored, while energy and utilities declined the most, with higher concentration of individual stocks, CICC added.

At the individual stock level, the concentration of leading stocks increased significantly. TENCENT (00700.HK), BABA-W (09988.HK) and SMIC (00981.HK) were the most favored, but CNOOC (00883.HK) and MEITUAN-W (03690.HK) declined significantly.

In 1Q25, Chinese public equity funds' heavyweight stocks were in TENCENT, BABA-W and SMIC, with the largest inclines in both number of holders and market capitalization, while those in MEITUAN-W, CNOOC and SUNNY OPTICAL (02382.HK) recorded largest declines.

In terms of heavyweight stock holdings, BABA-W and SMIC also replaced MEITUAN-W and Xiaomi in the top three heavyweight stock list.

Compared with the end of 2024, the number of holders of BABA-W, TENCENT, SMIC and Pop Mart rose the most, while the number of funds holding MEITUAN-W, CNOOC, BYD ELECTRONIC (00285.HK) and CHINA SHENHUA (01088.HK) decreased significantly.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

<Research>Daiwa Sees Limited Upside for HSI, Prefers HK Stocks w/ Tech Trading Opportunities Like BEIGENE/ Others

The results of the first round of US-China trade talks held in Geneva, Switzerland on 10-11 May far exceeded investors' expectations.

The US and China agreed to reduce the reciprocal tariffs on each other since 2 April from 125% to 10% for 90 days, according to the US-China joint statement.

US Treasury Secretary Scott Bessent emphasized that both sides do not want a trade decoupling, and voiced optimism about the establishment of a bilateral mechanism for continued talks.

Daiwa estimated “trade optimism” to boost the Chinese stock market in the short term, with the HSI likely to be close to its March peak, and believed that there are tactical trading opportunities for “tariff-hit sectors” such as electronics, textile, shipping and electrical equipment.

Therefore, the broker added LUXSHARE PRECISION(002475.SZ) and HUALI GROUP(300979.SZ) to its top pick list for Chinese stocks, and removed CHINA RES BEER (00291.HK) and others.

Daiwa also picked out Hong Kong stocks looking for technical trading opportunities after the US-China trade talks, including BEIGENE (06160.HK) , AAC TECH (02018.HK) and BYD ELECTRONIC (00285.HK) .

Related News: G Sachs Lifts 2025 Earnings Forecast for HKEX by 2%, Adds TP to $398

From a long-term perspective, Daiwa reiterated its projection that the HSI will have limited upside as the SHCI and the HSI have already exceeded its 2025 interim target and are close to its year-end target.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

Goldman Sachs says investors should be precise about sectors when buying Chinese stocks

by Aileen Chuang

Investors should be precise when buying stocks from mainland China, in light of its trade truce with the US and a wave of technological innovations and policy moves.

“We need to focus more on implementation and identify the right investment pockets, especially given the recent improvement in market indices.

Investors should allocate to sectors that offer better risk and reward.”

Source: SCMP

https://www.scmp.com/business/banking-f ... 10805&tc=7

[winston]

Mainland Chinese households set to buy another US$100 billion of Hong Kong stocks: HSBC

Chinese households are poised to deploy some 50 trillion yuan (US$6.5 trillion) of excess savings into stocks in Hong Kong and elsewhere.

by Yulu Ao

Mainland Chinese households are sitting on 160 trillion yuan (US$22 trillion) in cash, mostly stashed away in bank time deposits, and about a third of it could flow into stock markets in Hong Kong and elsewhere as lower interest rates fuel demand for riskier assets, according to HSBC.

Some 50 trillion yuan, deemed excess savings over the pandemic years – an amount beyond retirement needs – could soon find its way back into local and offshore equity markets as Chinese households replenish their stock holdings after trimming them over the past 15 years, strategists including Herald van der Linde, head of Asia-Pacific equity research, said in a report on Monday.

“Mainland Chinese households’ appetite for buying in Hong Kong means that low onshore interest rates are now lowering Hong Kong equity discount rates,” the bank said.

“In our view, Hong Kong will increasingly be used by Chinese households as a gateway to global or regional investments.”

Source: HSBC

https://www.scmp.com/business/china-bus ... pe=section

[winston]

Citibank says more rich people from mainland, Southeast Asia look to invest in Hong Kong

Hong Kong attracts affluent investors from China and Southeast Asia, boosting Citibank’s client base

by Julie Zhang

A growing number of affluent people from mainland China and Southeast Asia, are looking to park their money in Hong Kong because it is a global centre for wealth management, according to Janus Wu, head of international personal banking (IPB) at Citibank (Hong Kong).

Wu said in the first quarter, Citibank’s high-net-worth international personal banking clients surged 13 per cent from a year earlier while its assets under management rose 16 per cent.

The bank’s Citigold account requires a minimum investment of HK$1.5 million (US$192,308) and offers global customers multicurrency investment advice and products across markets.

Source: SCMP

https://www.scmp.com/business/banking-f ... pe=section

[winston]

UBS upbeat on China stocks, citing tariff pause with US and potential Beijing stimulus

Swiss bank also cites low valuations for Chinese equities as investors diversify away from US assets

by Aileen Chuang

UBS Group is optimistic about Chinese stocks, citing the recent tariff pause with the US, potential stimulus measures from Beijing and attractive low valuations as key drivers, according to a senior executive.

“I’m optimistic on China and Hong Kong, as the markets should focus on the valuation opportunities that they represent,” said Neil Hosie, the Swiss bank’s global head of execution services, in Hong Kong last week.

“There are still more stimulus measures that China can take that could further boost the market and sentiment.”

The bank’s positive stance came as global investors appeared to be interested in divesting away from US equities and harboured concerns about other American asset classes amid trade tensions.

Source: SCMP

https://www.scmp.com/business/banking-f ... pe=section

[winston]

China Strategy: Quality yields to cushion market volatilities

Quality yield stocks have been one of the investment themes in Chinese equities to cushion market volatility amid tariff dispute escalation and geopolitical tensions.

Although US-China trade tensions have de-escalated since a joint statement was issued by the US and China on 12 May, and a mutual roll back of tariffs on goods for a 90-day period was agreed upon, we believe quality yield stocks should remain part of a portfolio’s core holdings in light of lower interest rate environment and the lengthy ongoing trade negotiations.

The People’s Bank of China (PBoC) has reiterated the intention to implement a moderately loose monetary policy and announced a 10bps cuts in policy rate, a 0.5ppt cut in reserve requirement ratio (RRR) and a 10bps cut in benchmark lending rate last month.

The 10Y Chinese government bond (CGB) has been hovering round 1.6-1.7% and is forecasted to be at 1.6% and 1.7% in 2025 and 2026 respectively, according to Bloomberg.

In Hong Kong (HK), the 1-month HIBOR plunged to 0.5-0.6% last month before rebounding to 0.8% recently.

The low-interest rate environment in HK and Mainland China, would support an ongoing hunger for yield and we expect high yielding stocks will continue to gain traction, especially with the Southbound insurance funds.

Coupled with Chinese policymakers encouraging long-term capital – such as state-owned insurers and mutual funds – to participate in equity market, quality yield stocks should benefit from incremental fund inflows.

We update our quality yield stock screen by not just focusing on dividend yield but also taking into consideration solid balance sheets and cash flows, which should support sustainable dividend payments and shareholders’ return.

In light of the uncertainties of US-China trade tensions, we prefer companies that have lower US revenue exposure.

We prefer China Telecom (728 HK), China Mobile (941 HK), Ting Yi (322 HK), Uni-President (220 HK), PetroChina (857 HK), CCB (939 HK), ICBC (1398 HK), HSBC (5 HK), Ping An (2318 HK), China Resources Gas (1193 HK) and Power Assets Holding (6 HK).

Source: OCBC

[winston]

Hong Kong stock rally shakes up investor playbook for China

By John Cheng & Hoi Yuet Woo

The Hang Seng China Enterprises Index has beaten the CSI 300 Index by nearly 20 percentage points so far in 2025, heading for the biggest annual outperformance in two decades.

Mainland investors have poured nearly US$90 billion (RM382.6 billion) into Hong Kong stocks this year, already nearing 90% of the whole amount for 2024.

H-shares are likely to continue outperforming A-shares, driven by global rebalancing flows and strong Southbound flows.

The Hang Seng China gauge has gained 17% this year, the CSI 300 Index has shed more than 2%.

State funds have been notably absent.

Source: Bloomberg

https://theedgemalaysia.com/node/759922