Friday (December 19) brought much-needed relief to Hong Kong stocks after a prolonged slump.
Key indices delivered solid performances: the Hang Seng Index rose 0.75%, the Hang Seng Tech Index climbed 1.12%, and the Hong Kong Stock Connect Internet Index gained 0.88%, offering a "Christmas gift" to the year-end market.
**Reasons Behind the Rebound** 1. **Improved External Liquidity Expectations**: U.S. inflation slowed more than expected, strengthening market expectations for Fed rate cuts next year. This is a significant positive for offshore markets like Hong Kong, suggesting reduced external liquidity pressures.
2. **Steady Inflows from Mainland Investors**: Southbound capital has become the most robust support for Hong Kong stocks, with net inflows exceeding HK$1.4 trillion this year. Even during market corrections, inflows have largely persisted, reflecting mainland investors' long-term commitment to Hong Kong assets.
3. **Sentiment and Valuation Recovery**: After recent adjustments, major Hong Kong stock indices are trading at historically low valuations, offering higher safety margins. Some new funds have rapidly completed fundraising and started building positions, signaling institutional interest in capitalizing on the market dip.
4. **Supportive Policy Environment**: Recent economic policy meetings confirmed continued accommodative monetary measures to stabilize growth, providing a macro-level confidence boost.
CITIC Securities noted that after a one-sided rally in September, Hong Kong stocks underwent volatility due to shifting overseas macro expectations. Currently, both A-shares and H-shares are completing mid-term adjustments, with select quality Hong Kong assets re-entering attractive valuation zones. With earnings recovery and improving macro conditions, the market presents a noteworthy year-end trading opportunity.
**Key Hong Kong Stock ETFs to Watch** 1. **Hong Kong Internet ETF (513770)** - **Index Tracked**: CSI Hong Kong Stock Connect Internet Index - **Investment Thesis**: Strong AI and catch-up potential. Focuses on leading internet firms in e-commerce, gaming, and social media, capturing China’s digital economy growth. - **Liquidity**: Assets exceed RMB 12.18 billion, with RMB 1.48 billion inflows in the past month.
2. **Hong Kong Stock Connect Innovative Pharma ETF (520880)** - **Index Tracked**: Hang Seng Hong Kong Stock Connect Innovative Pharma Select Index - **Investment Thesis**: Pure-play innovative drug developers (excluding CXO), with top 10 holdings at 72% concentration. Despite recent dips, net inflows hit a record 4.178 billion shares, reflecting confidence in long-term value (e.g., overseas expansion).
3. **Hong Kong IT ETF (159131)** - **Index Tracked**: CSI Hong Kong Stock Connect IT Composite Index - **Investment Thesis**: Focused on AI hardware (70% hardware + 30% software), including semiconductor leaders like SMIC. Well-positioned for chip localization and AI computing demand.
4. **Hong Kong Stock Connect Healthcare ETF (159137)** - **Index Tracked**: CSI Hong Kong Stock Connect Healthcare Theme Index - **Opportunity**: Combines low valuations (30.44x P/E) with high growth expectations (20%-25% profit growth in 2026E/2027E). Covers unique A-share-scarce leaders in internet healthcare and innovative drugs.
5. **Hong Kong Stock Connect Auto ETF (520780)** - **Index Tracked**: CSI Hong Kong Stock Connect Auto Industry Theme Index - **Opportunity**: Taps into EV and smart-auto trends, featuring NEV startups and traditional automakers. The sector surged 2.46% on December 19, led by XPeng (+7.65%) and Horizon Robotics (+7.04%).
*Data sourced from public market information; not investment advice. Invest with caution.*
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