Hong Kong stocks trade continuously for 11 days, what should you buy in the Hong Kong stock market?

During the National Day holiday, I believe friends who have held Hong Kong stocks before are more confident than before. In the past week, market sentiment has shifted from extreme caution to extreme greed. The sudden change has left Chinese stock investors, who have been in a slump for more than three years, in disbelief. Half a month ago, the Shanghai and Shenzhen 300 Index and the Hang Seng Index were the worst-performing major assets globally for the year, but now the Hang Seng Index and the Shanghai and Shenzhen 300 Index are the best-performing markets for the year. This is the charm of the market. Since September 20th, our article " Rate Cut Opens, Long-Awaited Hang Seng Tech Index " advocated holding the Hang Seng Tech Index ETF (513180), which has now steadily gained a 30% increase. Once again, it proves that excessive pessimism is futile when the downside risk is limited. Only rational optimists can seize money-making opportunities by adapting their mindset to market changes. With the significant shift in market sentiment, the most frequently asked questions in the past few days have been whether Hong Kong stocks are still worth buying, what to buy, and how to buy. Although A-shares have been closed for a week, Hong Kong stocks have only been closed for one day this week. We have worked overtime to share the latest insights with everyone to better understand this round of market trends. I. Source of incremental funds, FOMO from foreign capital On the last day before the National Day holiday, A-shares set a new record for trading volume, with the Shanghai Composite Index returning to above 3300 points and the Hang Seng Index returning to above 21000 points, with a historical high trading volume of 500 billion. It is worth noting that during the market in May this year, the highest trading volume of the Hang Seng Index was only around 200 billion. The average daily trading volume before the start of this round of market was in the range of 700-1000 billion. The trading volume has multiplied compared to before, which proves the uniqueness of this round of market and the high level of attention global funds are paying to Chinese assets. Where does such a large trading volume come from? In addition to the more than 200 billion of southbound funds accumulated in the past four months, it is definitely the foreign capital that is most afraid of missing out on this round of market. In the face of a major market rally, it is more intuitive to look at the flow of funds than to express opinions. Friends who have been following our articles should have an impression. Shorting Hong Kong stocks/Longing Nikkei 225 is the hottest trading strategy for global hedge funds this year. Hong Kong stocks/Nikkei 225 are known as the two ends of a seesaw, with foreign capital shorting Hong Kong stocks and buying Japanese stocks. From the perspective of foreign capital, "Short China/Long Emerging Markets" was one of the most crowded strategies globally just two weeks ago. This led to the overvaluation of Nikkei 225 and the Indian market in the eyes of foreign capital, while only Chinese assets were undervalued and at extremely low positions. At the end of August, Chinese stocks accounted for only 5.1% of the total global investment portfolio, the lowest level in the past 10 years. However, in the past 9 days, Chinese stocks have been bought by macro funds, quantitative funds, and long funds for 9 consecutive trading days, with funds rapidly increasing their positions in Chinese stocks. As of last Friday, the total/net allocation of global investment portfolios to Chinese stocks was 5.3%/8.1%, still at a low point in the past 5 years. The total position allocation has only increased from 5.1% at the end of August to 5.3%; although Hong Kong stocks surged last week, foreign capital replenishment has just begun.** In other words, global funds are still significantly underweight on Chinese assets. If China can overcome the recent economic weakness, the potential valuation recovery space for Chinese assets remains highly attractive to foreign capital. Due to valuation comparisons, Nikkei 225 has a PE ratio of 20 times, the Indian market has a PE ratio of 25 times, and even after a 20% surge, the Hang Seng Index is currently only at a PE ratio of 10 times, a difference of one times in valuation. Funds chase returns, regardless of how pessimistic foreign capital was about Chinese concept stocks, how underweight they were, or how much they favored other targets in emerging markets. If Chinese corporate profits improve, foreign capital will have to sell Nikkei 225/Indian market and turn to replenish the extremely underweight Chinese market with a PE ratio of only 10 times. More importantly, in the past two years, apart from China, did foreign capital really like emerging markets because of the good actual growth of emerging markets, or are there no other issues? Obviously, Japan is facing issues such as the depreciation of the yen and a slowdown in the domestic economy, while India also has problems with inadequate corporate governance. However, compared to these, it seems that China's problems are harder to solve, leading to continuous outflow of foreign capital or waiting for opportunities. The market is currently at a crucial turning point for solving these issues. This explains why in recent days, foreign investors seem more excited than us, first shouting "this time is different", then hedge fund giants shouting "Buys everything China-Related", and now the "FOMO" frenzy. Ultimately, as emerging markets are at high valuations, the Chinese market is rebounding from the bottom, presenting new opportunities for profit. Second, in a valuation repair market, what to buy? After the surge last week, some investors are excited while others fear heights, and the sustainability of the subsequent market is the most discussed topic in recent days. As for the sustainability of the market going forward, it depends on three factors: first, the extent of foreign capital replenishment. According to data, global funds' highest allocation to Chinese stocks was 14.6%, but now it is 5.3%. If foreign capital can replenish to 8% or even 10%, it will bring in a significant amount of funds. Second, it depends on the execution of PBOC's three 500 billion initiatives. Third, it depends on the attractiveness of market profit effects to off-market funds, as there are over a hundred billion yuan of residents' deposits outside the market watching this market surge. In fact, this is a macro repair market where the denominator rises, with all stocks in the market rising, not driven by EPS profit growth in the numerator. In other words, at the beginning of the market, 99% of stocks are rising, so there is no need to worry about what to buy, but rather about what is still available to buy. Next, large funds will prioritize core assets with EPS repair growth under fiscal policy efforts. What are the core assets in the Hong Kong stock market? They are the Hang Seng Tech Index ETF (513180), Hang Seng Internet ETF (513330), and Hang Seng Healthcare ETF (159892). With the market's beta major repair, the advantages of ETFs are highlighted, eliminating concerns about missing out on the market due to stock selection errors or losing money on bad stocks in the market. Particularly noteworthy are the mentions of internet stocks in the Hang Seng Tech Index, where large buybacks support stock prices, the optimization of the competitive landscape of internet platforms, and the fact that internet giants are closely related to the lives of most Chinese people. With the improvement in the macro economy, the certainty of EPS growth for these companies this year is higher. As for Hang Seng Healthcare, the negative impact of the U.S. healthcare bill has been resolved for now, and with the opening up of U.S. interest rate cuts, it will continue to benefit from valuation repair. Conclusion: Looking back at the rise in the Hong Kong stock market, the Hang Seng Tech Index ETF (513180), Hang Seng Internet ETF (513330), and Hang Seng Healthcare ETF (159892) often have the greatest room for elasticity For example, in the Hong Kong stock market in April and May this year, the gains of these 3 ETF indices were 25%, 30%, and 20% respectively. In the past half month, the gains of these 3 ETFs have all exceeded 30%, which is no less impressive than individual stock performance. If you are unsure of what to buy now, then choose the ETF with the greatest flexibility and the best liquidity, and you can't go wrong.