Some friends left a message saying that this year, is buying the Hang Seng Index at the bottom and are almost showing depression.
isn't it! The Hang Seng Index fell from the beginning of the year without looking back, and hit a new low in December. When will this method of decline end?
Now the bad news of bearish Hang Seng is one after another, and the friends who are buying at the bottom of the fixed investment have begun to doubt their lives.
But the more pessimistic the market is, the greater the opportunity. This is common sense in the investment market, and never ignore common sense. If everyone is optimistic, you won’t make much money. You just need to remember that this is a wide-based index, and there is no possibility that it cannot rise!
Not only that, Hong Kong stock may be one of the most beautiful boys in the world in the next five years.
Let’s first look at the most criticized shortcomings of Hong Kong stocks!
1. The biggest disadvantage of Hong Kong stocks: poor liquidity
Liquidity can be measured by Hong Kong dollar M2 ( broad currency ). The increase in M2 indicates that there is a lot of money in the market and can drive the stock market to rise, and vice versa.
As can be seen from the figure below, M2 usually changes first, and then the Hang Seng Index and Technology Index change accordingly.
In January 2021, M2 began to fall, so the Hang Seng Index fell. In October, it fell out of the sky: -4.24%.
This is a new low in 2013. The last time I entered the negative range was in 2008. The reason why
M2 fell so quickly is because the Hong Kong dollar and the US dollar are related to the exchange rate system, that is, the exchange rate between the Hong Kong dollar and the US dollar remains at a ratio of 7.8, changing within a narrow range of 7.75~7.85.
So, since the 1980s, no matter what black swan event occurs in the outside world, the exchange rate of the Hong Kong dollar against the US dollar has almost not changed much. How to achieve exchange rate stability in
?
- 1. When the US dollar appreciates, HKMA sells US dollars and buys Hong Kong dollars;
- 2. When the US dollar depreciates, the HKMA buys US dollars and sells Hong Kong dollars.
This year, the US dollar has been constantly appreciating, so the Hong Kong dollar in the market is naturally collected, there is not enough money in the market, and the stock market will perform poorly.
Seeing this, some friends were in a panic. Will the United States raise interest rates next year? Will M2 be lower?
Don’t panic. In fact, foreign capital has been continuously reducing its holdings in Hong Kong stocks since 2018, but do you see that the Hang Seng Index has fallen all the way?
has also risen by 50% after the epidemic in 2020!
First of all, M2 is so low this year because the price was released last year and the base is too high. The base for next year will naturally decrease!
In addition, is not the only foreign capital that determines the capital side of Hong Kong stocks!
2. Hong Kong stocks have a new faucet
In the past, there was only one faucet for foreign capital in Hong Kong stocks, but in 2014, Shanghai-Hong Kong Stock Connect was launched, and there was another funder father in Hong Kong stocks, that is the RMB! So a phenomenon emerged: Sometimes the US dollar strengthened, but the Hong Kong dollar M2 did not decrease.
For example, in 2016, the US dollar strengthened, as shown below.
But at this time, the Hong Kong dollar M2 did not decrease, but increased. Therefore, from 2016 to 2017, the Hang Seng Index staged a bull market!
In 2016, after the launch of the Shenzhen-Hong Kong Stock Connect, the liquidity of Hong Kong stocks has been improved even more.
southbound funds transaction volume accounts for the total transaction volume of Hong Kong stocks from 5% in 2016 to 22% now , which has become a force that cannot be ignored.
Since the launch of the Shanghai-Hong Kong Stock Connect at the end of 2014, the cumulative amount of net purchase of in is about HK$2.17 trillion, and the speed of southbound capital inflow is still accelerating.
In other words, the valuation of Hong Kong stocks is so low now. If foreign capital does not want , it just so happens that we will pick up bargains . Wouldn’t it be great? There is another interesting phenomenon in
. Although the Hang Seng Index has been falling this year, among our domestic public funds, funds that can allocate Hong Kong stocks usually perform better than those that can only allocate A shares and .
Some friends left a message saying that this year, is buying the Hang Seng Index at the bottom and are almost showing depression.
isn't it! The Hang Seng Index fell from the beginning of the year without looking back, and hit a new low in December. When will this method of decline end?
Now the bad news of bearish Hang Seng is one after another, and the friends who are buying at the bottom of the fixed investment have begun to doubt their lives.
But the more pessimistic the market is, the greater the opportunity. This is common sense in the investment market, and never ignore common sense. If everyone is optimistic, you won’t make much money. You just need to remember that this is a wide-based index, and there is no possibility that it cannot rise!
Not only that, Hong Kong stock may be one of the most beautiful boys in the world in the next five years.
Let’s first look at the most criticized shortcomings of Hong Kong stocks!
1. The biggest disadvantage of Hong Kong stocks: poor liquidity
Liquidity can be measured by Hong Kong dollar M2 ( broad currency ). The increase in M2 indicates that there is a lot of money in the market and can drive the stock market to rise, and vice versa.
As can be seen from the figure below, M2 usually changes first, and then the Hang Seng Index and Technology Index change accordingly.
In January 2021, M2 began to fall, so the Hang Seng Index fell. In October, it fell out of the sky: -4.24%.
This is a new low in 2013. The last time I entered the negative range was in 2008. The reason why
M2 fell so quickly is because the Hong Kong dollar and the US dollar are related to the exchange rate system, that is, the exchange rate between the Hong Kong dollar and the US dollar remains at a ratio of 7.8, changing within a narrow range of 7.75~7.85.
So, since the 1980s, no matter what black swan event occurs in the outside world, the exchange rate of the Hong Kong dollar against the US dollar has almost not changed much. How to achieve exchange rate stability in
?
- 1. When the US dollar appreciates, HKMA sells US dollars and buys Hong Kong dollars;
- 2. When the US dollar depreciates, the HKMA buys US dollars and sells Hong Kong dollars.
This year, the US dollar has been constantly appreciating, so the Hong Kong dollar in the market is naturally collected, there is not enough money in the market, and the stock market will perform poorly.
Seeing this, some friends were in a panic. Will the United States raise interest rates next year? Will M2 be lower?
Don’t panic. In fact, foreign capital has been continuously reducing its holdings in Hong Kong stocks since 2018, but do you see that the Hang Seng Index has fallen all the way?
has also risen by 50% after the epidemic in 2020!
First of all, M2 is so low this year because the price was released last year and the base is too high. The base for next year will naturally decrease!
In addition, is not the only foreign capital that determines the capital side of Hong Kong stocks!
2. Hong Kong stocks have a new faucet
In the past, there was only one faucet for foreign capital in Hong Kong stocks, but in 2014, Shanghai-Hong Kong Stock Connect was launched, and there was another funder father in Hong Kong stocks, that is the RMB! So a phenomenon emerged: Sometimes the US dollar strengthened, but the Hong Kong dollar M2 did not decrease.
For example, in 2016, the US dollar strengthened, as shown below.
But at this time, the Hong Kong dollar M2 did not decrease, but increased. Therefore, from 2016 to 2017, the Hang Seng Index staged a bull market!
In 2016, after the launch of the Shenzhen-Hong Kong Stock Connect, the liquidity of Hong Kong stocks has been improved even more.
southbound funds transaction volume accounts for the total transaction volume of Hong Kong stocks from 5% in 2016 to 22% now , which has become a force that cannot be ignored.
Since the launch of the Shanghai-Hong Kong Stock Connect at the end of 2014, the cumulative amount of net purchase of in is about HK$2.17 trillion, and the speed of southbound capital inflow is still accelerating.
In other words, the valuation of Hong Kong stocks is so low now. If foreign capital does not want , it just so happens that we will pick up bargains . Wouldn’t it be great? There is another interesting phenomenon in
. Although the Hang Seng Index has been falling this year, among our domestic public funds, funds that can allocate Hong Kong stocks usually perform better than those that can only allocate A shares and .You can think about the reason.
Because the Hang Seng Index is mainly dragged down by China Internet, finance and real estate this year. But the performance of other similar sectors is no worse than that of A-shares.
Among the domestic public funds, the funds that can invest in Hong Kong stocks are also rapidly increasing. There are only 580 in 2020, and there are 1,036 this year. This fully shows that institutions are doing their best to buy goods in Hong Kong stocks!
Once you understand this, you will understand that although the RMB is not the dominant force in Hong Kong stocks, the trend is unstoppable. (For example, html net inflow of southbound funds into Hong Kong stocks in November 51.25 billion yuan, setting a monthly high since February this year ) The future liquidity of Hong Kong stocks will come from at least 50% of the RMB! It will be greatly improved.
3. The seesaw effect of Hong Kong stocks and Hong Kong housing prices
Hong Kong is very similar to the mainland, that is, once housing prices rise, the stock market will fall, and vice versa.
So, the Hong Kong real estate market performed poorly in 2009, 2012, 2014, 2016 and 2020, but Hong Kong stocks performed well.
Now Hong Kong's real estate market has entered a low-speed growth trend. In the future, funds will overflow from the real estate market will be more obvious. Hong Kong stocks will have certain benefits on the capital side.
4. Hang Seng Index has actually broken the net, and the extreme pessimism has reached
December 22, 2021, the price-to-book ratio of the Hang Seng Index is 1.07 times, which is just a small step away from breaking the net. This is the time of extreme pessimism.
Templeton once said, buy when you are extremely pessimistic and sell when you are extremely excited. The most pessimistic time is when Mr. Market sent us money. All you have to do is buy and wait.
Judging from the history of the past 20 years, the Hang Seng Index has only broken net twice, one was the stock market crash in 2016 and the other was the epidemic in 2020. Another time when the net was almost broken was the 2008 financial crisis. What happened afterwards?
2009 index doubled; rebounded by more than 60% in 2016 and rebounded by 50% in 2020!
One more thing to note here is that in 2020, the Hang Seng Index adjusted the component and joined many technology companies. If is compiled according to the old Hang Seng Index, it has actually been broken!
Break the net means a great opportunity!
5. If you don’t buy the bottom, I will copy my own bottom
As of December 20, 2021, there is a set of data worth paying attention to!
The repurchase amount of Hong Kong-listed companies reached HK$36.16 billion, setting a new record.
When other investors are still worried about the risks of Hong Kong stocks, listed companies will copy their own bottom. This means that they all think that the price is simply too cheap, and they will be sorry for themselves if they don’t buy it.
After every big repurchase, the Hang Seng Index performed well , see the figure below:
Even listed companies are so optimistic about their stock prices. What else do we have to worry about?
6. Summary
In my opinion, in the next five years, Hong Kong stocks are likely to be one of the most impressive markets in the world.
First of all, the liquidity that has been criticized by Hong Kong stocks will gradually improve;
Secondly, the valuation is extremely undervalued, which is safe enough. PE is at a historical low (after adjusting the valuation of technology stock ), PB has actually broken net;
Third, from the perspective of constituent stocks, China Internet is at a historical low level, with the greatest elasticity in the future; finance and real estate have fallen to no a drop, and the policy bottom has emerged; the profits of consumer stocks will improve after the CPI-PPI narrows, and the valuation is at the median;
fourth, Hong Kong listed companies have already demonstrated confidence with record repurchases;
fifth, Hong Kong real estate has experienced another 20 years of rise, and the real estate cycle is about 20 years, so Hong Kong housing prices are already at the end of their strength. Funds will be withdrawn from the real estate market and enter the stock market.
A noteworthy risk is that liquidity may not be greatly improved next year, which mainly depends on whether southbound funds can fill the void of foreign capital withdrawal. But even if the liquidity of is not good, it can still rise as long as the valuation is low enough.
This is why I am talking about looking at Hong Kong stocks from a 5-year perspective. Therefore, we must also have long-term thinking on the funds we invest in Hong Kong stocks. Never trade short-term on Hong Kong stocks.
Regarding the strategy of investing in the Hang Seng Index, I introduced in my article on 2021-12-05, "The fixed investment in the Hang Seng Index for more than a year, with a loss of 15%, and my mentality collapsed! Still firmly optimistic about》, interested partners can take a look.
Friends who like my articles are welcome to follow my public account with the same name: Ruizhi Ruijian! The content above
is richer. Let’s read finance and learn investment together!
This is why I am talking about looking at Hong Kong stocks from a 5-year perspective. Therefore, we must also have long-term thinking on the funds we invest in Hong Kong stocks. Never trade short-term on Hong Kong stocks.
Regarding the strategy of investing in the Hang Seng Index, I introduced in my article on 2021-12-05, "The fixed investment in the Hang Seng Index for more than a year, with a loss of 15%, and my mentality collapsed! Still firmly optimistic about》, interested partners can take a look.
Friends who like my articles are welcome to follow my public account with the same name: Ruizhi Ruijian! The content above
is richer. Let’s read finance and learn investment together!
