Goldman Sachs Gao Hua Securities released a research report stating that on August 3, China Securities Regulatory Commission Chairman Wu Qing delivered a speech at the launch ceremony of the renminbi government bond futures in Hong Kong, proposing five measures to deepen practical cooperation between the two capital markets. The regulatory level continues to release policy dividends for cross-border connectivity, which will enhance the activity of both capital markets, enrich product supply, and increase the global allocation value of Chinese assets. Hong Kong Exchanges and Clearing Limited (00388) and high-quality brokerages providing cross-border financing and investment services are expected to benefit in the long term. Currently, the securities sector's PB and PE valuations are at 1.2x and 16x respectively, with multiple brokerages issuing mid-term performance pre-announcements. The analyst maintains a "buy" rating for the securities industry, citing low valuations and high earnings growth rates. The key viewpoints of Goldman Sachs Gao Hua Securities are as follows.
Continued support for two-way financing, with Hong Kong stock structure optimization
Since the beginning of 2024, over 270 mainland enterprises have completed filings to list in Hong Kong, raising more than HKD 650 billion. The market value and trading volume of mainland enterprises listed in Hong Kong account for 80% and 90% of the total, respectively. Among them, leading companies in sectors such as new energy, new consumption, biomedicine, and artificial intelligence have listed in Hong Kong, continuously optimizing the industry structure of the Hong Kong stock market. In the next step, the CSRC will continue to support mainland enterprises listing in Hong Kong and high-quality Hong Kong-listed companies listing in the mainland, while also supporting eligible Hong Kong enterprises issuing bonds in the mainland. Two-way corporate cross-border financing is being opened up, with high-quality supply in Hong Kong stocks continuing to expand.
Further expansion of cross-border connectivity products
Currently, international investors hold RMB 3.2 trillion in Chinese bonds. The launch of the 5-year renminbi government bond futures in Hong Kong provides foreign investors with a convenient and efficient interest rate risk management tool. The market value coverage rate of both Shanghai-Shenzhen-Hong Kong Stock Connect stocks has exceeded 90%. Initiatives such as the renminbi stock trading counter and the inclusion of REITs into the Shanghai-Shenzhen-Hong Kong Stock Connect are being actively advanced. The CSRC will also support cooperation between index companies on both sides to launch more indices based on Chinese assets, promote the introduction of more ETF products by industry institutions on both sides that are based on the two markets and layout China's modern industrial system, and support Hong Kong in launching more renminbi-denominated and settled futures varieties. With more diverse product structures, the continued deepening of cross-border connectivity is expected to enhance the activity of both capital markets.
Establishment of the "Five Major Synergies" framework, with a clear cooperation path
In addition to the functional synergy of two-way financing and the synergy of launching diversified products, the CSRC will also focus on ecological synergy, regulatory synergy, and governance synergy. It will support high-quality securities and fund companies in operating in Hong Kong and strengthen regulatory cooperation between the two sides. The "Five Major Synergies" form a systematic blueprint for cooperation, promoting the high-quality development of both capital markets through systematic collaboration.
Risk warnings
Macroeconomic downturn; significant decline in equity market activity; policy implementation progress and effects falling short of expectations.
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