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2023.09.19 07:22
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Is Hong Kong stocks favored by southbound funds, but is a reversal still far away?

The upward trend in the Hong Kong stock market still relies on corporate profitability, so the systematic upward movement of the index still needs to wait for the validation of sustained improvement in economic data.

This article is sourced from Zhang Yusheng and Liu Fang from Everbright International.

After the positive tone set by the July Political Bureau meeting, relevant departments have coordinated their efforts and implemented multiple measures to effectively leverage policy synergy. These measures include halving stamp duty collection and timely adjusting and optimizing the real estate market. They demonstrate the current policy's determination to stabilize economic growth and invigorate the capital market. The proactive stance of the policy is conducive to further solidifying investor expectations and boosting market sentiment.

Why has there been a continuous net inflow of southbound funds recently?

Recent policy evaluation

Historically, comprehensive reserve requirement ratio cuts have been able to boost market sentiment to a certain extent. After a comprehensive reserve requirement ratio cut, the overall performance of the Hong Kong stock market has been relatively good for a period of time. However, the boosting effect is limited.

On the one hand, the impact of reserve requirement ratio cuts on the stock market mainly depends on the extent of improvement in the real economy after the interest rate cut is implemented. On the other hand, the Hong Kong stock market is less affected by mainland liquidity and more affected by overseas liquidity.

In addition to the currently high AH premium, the frequent release of favorable policies related to real estate is the reason for attracting continuous net inflows of southbound funds. Moreover, there are a large number of financial and real estate stocks in the Hong Kong stock market, most of which are leading enterprises. Therefore, under the stimulation of favorable policies related to real estate, southbound funds are attracted to flow into related sectors.

The current macro policies have been intensively implemented as a combination of punches. As one of the policy tools, the reserve requirement ratio cut is conducive to consolidating the momentum of economic recovery, enhancing investor confidence, and boosting market sentiment.

Investment strategy

Historically, although the time from the policy bottom to the actual improvement in the economy is not stable, the relevant policies in this round of active capital market and the current unexpectedly large reserve requirement ratio cut may still effectively boost market sentiment.

However, the upward trend of the Hong Kong stock market still requires the support of corporate profits. Therefore, the systematic upward movement of the index still needs to wait for the continuous improvement of economic data to be verified.