Southbound capital has become a new force, what are their favorites?
The newly adjusted Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect list officially took effect from September 10, 2024.
The main reason this adjustment has attracted attention is that e-commerce giant $BABA-W(09988.HK) achieved dual primary listing on the $HKEX(00388.HK) and the New York Stock Exchange on August 23, 2024. According to the Stock Connect rules, Alibaba (BABA.US), which has achieved primary listing in Hong Kong, can be included in the Stock Connect list.
Alibaba was indeed included in the Stock Connect list on September 10, meaning mainland investors can now buy and sell Alibaba's H-shares through the Stock Connect.
List of Companies Added to the Stock Connect
In addition to Alibaba, the 33 Hong Kong-listed companies added to the Stock Connect include several well-known mainland enterprises, such as $SUNSHINE INS(06963.HK), SF City Delivery (09699.HK), NetEase's (09999.HK) Cloud Music (09899.HK), Laopu Gold (06181.HK), Vanke's (000002.SZ) property management subsidiary Onewo (02602.HK), and autonomous driving solutions provider Zhixing Auto Tech (01274.HK). See the table below.
List of Companies Removed from the Stock Connect
On the other hand, the two exchanges also removed 33 Hong Kong-listed companies from the Stock Connect list, including hotpot chain Xiabuxiabu (00520.HK), gaming company CMGE (00302.HK), and prominent mainland property developers CIFI Holdings (00884.HK), Sino-Ocean Group (03377.HK), and Agile Group (03383.HK), as well as healthcare stocks like MicroPort CardioFlow (02160.HK), Sirnaomics (02257.HK), and 3D Medicines (01244.HK).
Impact of the Stock Connect List Changes
The market reacted strongly to the changes in the Stock Connect list.
Alibaba, which had accumulated significant buying interest, was heavily sought after by southbound capital. Wind data shows that on September 10, Alibaba's Shanghai Stock Connect buy volume reached HKD 2.17 billion, with sell volume at only HKD 66 million. The Shenzhen Stock Connect buy volume was HKD 6.364 billion, with sell volume at just HKD 16 million, making it the most active Stock Connect stock of the day.
On the other hand, mainland property stocks removed from the list faced selling pressure. Agile Group's stock price fell 13.75% on September 10, while CIFI Holdings dropped 14.64%, though both rebounded slightly on September 11.
What Are Southbound Capital's Favorites?
According to Wind data, southbound capital inflows totaled HKD 9.289 billion on September 10, accounting for about 8.69% of the Hong Kong market's average daily turnover of HKD 106.878 billion this year. Southbound capital has become a significant force in the Hong Kong market, with weekly inflows reaching HKD 15.117 billion and monthly inflows at HKD 24.382 billion.
As shown in the chart below, southbound capital has been consistently net positive over the past 60 trading days, with inflows generally exceeding HKD 3 billion.
At the individual stock level, Alibaba became the top favorite immediately after its inclusion. As shown in the chart below, in the past seven trading days, Alibaba, despite being included for just one day, became the most net-bought stock by southbound capital. The Tracker Fund (02800.HK), which reflects blue-chip performance, ranked second, followed by China Construction Bank (00939.HK).
According to Wind data compiled by Caijing, Tencent Holdings (00700.HK) saw the largest increase in Stock Connect holdings this year, with a value of HKD 91.45 billion. Stock Connect holdings now account for 9.99% of its total Hong Kong shares, with an increase of 57.684 million shares. Tencent's stock price has risen 26% year-to-date.
CNOOC (00883.HK) ranked second, with a holding value increase of HKD 77.53 billion, a net increase of 965 million shares, accounting for 19.97% of its total Hong Kong shares.
China Mobile (00941.HK) ranked third, with a holding value increase of HKD 47.63 billion, a net increase of 440 million shares, accounting for 12.39% of its total Hong Kong shares.
WuXi Biologics (02269.HK) saw the largest decline in Stock Connect holdings, down HKD 8.74 billion. However, net holdings increased by 440 million shares, accounting for 28.1% of its total Hong Kong shares. The decline in holding value may be due to its stock price drop of 62.3% amid unfair trade barriers from a major country.
XPeng (09868.HK) ranked second in terms of holding value decline, down HKD 8.54 billion, with a net reduction of 28.21 million shares. Its stock price has fallen 40.2% year-to-date, though Stock Connect holdings still account for 15.57% of its total Hong Kong shares.
Author: Mao Ting
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