Hong Kong Stock Market Review: Mid-game Rebound
The Hong Kong stock market rebounded at midday, with clear advantages in valuation and returns, especially for Chinese concept stocks such as LexinFintech in the financial technology sector, considering increasing the dividend payout ratio. On the other hand, the A-share market faces challenges in reducing holdings, with market expectations dropping from 10 trillion to 2 trillion. Goldman Sachs pointed out that on Tuesday, hedge funds selling Chinese stocks reached a record high, with the market focusing on future consumption stimulus measures and local debt commitments
The stock market trend is similar to yesterday, but the signs in the Hong Kong stock market are better, always having an advantage in terms of valuation and returns, which is also the case for Chinese concept stocks.
For example, several Chinese concept fintech companies that have experienced significant increases have a high return based on low PB ratios, dividends, and buybacks, with returns exceeding 10% before a major surge. Recently, LexinFintech also announced that they are considering increasing the dividend ratio from 20% to 25% next year. Of course, this industry model is not ideal, and high returns are meant to compensate for these shortcomings.
Possibly influenced by the U.S. stock market, most Chinese concept stocks have proposed clear shareholder return plans. Since they lack growth potential, they are starting to focus on continuous dividends.
In contrast, after the significant increase in A-shares, there have been many announcements of reductions in holdings. Once this money exits the market, it is unlikely to return, posing a significant challenge to stimulating the stock market. The first batch of 500 billion yuan in funds has officially arrived today, but opportunities for growth stocks are scarce at the moment. Funds and insurance companies may directly engage in high dividend arbitrage, especially considering that the ongoing low interest rate environment is already unfavorable for insurance companies.
Market expectations have now dropped from 10 trillion yuan to 2 trillion yuan. It is worth noting that initially, due to reports from foreign media, expectations were set too high, leading hedge funds to make a significant profit on Tuesday. According to Goldman Sachs, hedge funds sold a record amount of Chinese stocks on Tuesday and increased their short positions.
The current expectations are much more reasonable, but they are mainly driven by foreign media and unconfirmed news. Among them, 1 trillion yuan is expected to be used for trade-in subsidies and subsidies for families with two or more children to stimulate consumption, while another 1 trillion yuan is expected to be used for local government debt. The figures may not be sufficient, but the key lies in whether there will be a sustained commitment