CMSC: What Are the Recent Micro-Liquidity Issues in Hong Kong Stocks?

Stock News12-16 20:54

CMSC released a research report stating that the Hong Kong stock market has yet to stabilize following recent overseas interest rate cuts, primarily due to two internal liquidity issues: the implementation of new mutual fund benchmark regulations, which may lead to partial divestment from Hong Kong stocks, and the substantial short-term capital demand in the Hong Kong market. While these narratives persist and have been reinforced during the market decline, their overall impact remains relatively limited.

CMSC's key views are as follows: **Sector and Index Recommendations**: Internet (930604.CSI), Nonferrous Metals (931947.CSI), and Hong Kong Stock Connect Non-Bank Financials (931024.CSI).

**Last Week’s Market Performance**: During the week of December 8–12, Hong Kong stocks mostly declined. Among major indices, the Hang Seng Index fell 0.42%, while the Hang Seng Tech Index dropped 0.43%. The AH premium remained at 119.8. By sector, most industries saw losses, with only financials and information technology posting gains, while energy led the declines.

**Micro-Liquidity Trends**: Southbound capital recorded its first net outflow in six months, while Hong Kong and foreign capital saw simultaneous net inflows. 1) Southbound funds recorded a net outflow of HKD 3.4 billion, primarily from non-essential consumption sectors. 2) Foreign capital purchased a net USD 260 million via ETFs, with cumulative inflows nearing post-September 24 highs. 3) Hong Kong local ETFs also saw a net inflow of HKD 5.1 billion, bringing the year-to-date total to HKD 45.9 billion.

**Hong Kong Liquidity Changes**: Market interest rates in Hong Kong have eased, with overnight HIBOR at 1.71% and the 3-month HIBOR at 3.03%. The USD/HKD exchange rate stood at 7.78, gradually approaching the strong-side convertibility guarantee.

**Key Overseas Liquidity Shifts**: - The U.S. 2-year Treasury yield fell 36 bps to 3.522%. - The 10-year Treasury yield rose 47 bps to 4.182%. - The U.S. Treasury General Account (TGA) balance dropped by USD 10.27 billion weekly to USD 805.8 million. - Overnight reverse repo (ON RRP) usage continued to decline by USD 650 million weekly to USD 84 million.

**Risk Warnings**: Potential underperformance in economic data and policies, along with tighter-than-expected overseas policies.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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