To The Moon

A number of Hong Kong companies that have announced earnings in the last two weeks have seen a pullback, and even though the results themselves are not a big deal, they have been abandoned by investors.Among them, $SUNNY OPTICAL(02382)$ plunged -11%, while $BYD ELECTRONIC(00285)$ was down 10.65%.

Sunny's performance, for example, although not "perfect", but the market is expected to be more adequate.Comprehensive view:

1. Automotive lens of new energy vehicle penetration rate increase, smartphone market recovery (cell phone lens and module shipments increased by 13.1% and 13.3%, respectively, the penetration rate of high-end models to increase), so the revenue side of the growth rate is also more than expected

2. Cost control and product structure optimization results, so the gross profit margin and net profit margin improved significantly;

3. Important is the market's view, from the disk performance, may be worried about 2025 recovery is not as expected, especially the cell phone optical business.

Combined with last week, many companies, especially in the technology, consumer sector companies in the earnings announcement also appeared to "see the light". $HSTECH(HSTECH)$

$HKEX(00388)$ (-5.55%)

$ANTA SPORTS(02020)$ (-4.85%)

$ZA ONLINE(06060)$ (-5.21%)

$MNSO(09896)$ (-8.90%)

Even $TENCENT(00700)$ , plunged 3.8% after its earnings report.

This series of reactions to this wave of Chinese stocks "high expectations" market trend brought a negative reaction, more like a "good out" of the collective selling, rather than for the performance itself to judge.

So what kind of money makes up this wave of volatility?

$HSI(HSI)$ has entered a period of oscillating retracement after breaking through the 24,000-point mark at the beginning of the year.Although southbound funds continue to inflow in a big way and become an important force to promote the current round of market, but it also reveals a reality: southbound funds can not fully control the pricing power of Hong Kong stocks, especially in the key position of the lack of initiative to push up the momentum.

1. Southbound capital inflow accelerated, but "pricing power" is limited

After the Spring Festival, the accelerated inflow of southbound funds is very obvious, showing a large scale, fast speed characteristics:

• The number of trading days with net inflows exceeding HK$10 billion in a single day has reached as many as 10 times.

• The AH share premium index also narrowed to a low of 130.5% at the end of the year, reflecting that southbound funds continued to plunge into Hong Kong stocks, driving valuation repair.

2. Accelerated inflow of ETF funds and individual investors, warming market sentiment

Apart from southbound funds, Mainland ETF funds are also accelerating into the Hong Kong stock market:

• In February, the monthly net inflow of funds from ETFs investable in Hong Kong stocks hit a record high, showing that institutional funds continue to be optimistic about Hong Kong stocks.

• The participation rate of individual investors increased significantly, reflecting the mobilization of retail investors' sentiment and a gradual shift in the funding structure from "institutional-led" to "retail enthusiasm".

  

3. Abnormal volatility of small and medium market capitalization underlying, and suspected entry of lobbying and private equity funds.

In the Hong Kong stock market, the volatility of some of the small and medium market capitalization targets is obviously enlarged, which is highly similar to the characteristics of the A-share small and medium market market:

• Do not rule out the possibility of short-term speculation by lobbyists and private equity funds through the Hong Kong Stock Connect.

• This phenomenon is particularly obvious in the Hong Kong Stock Connect subject, and the past few rounds of the A-share market, "small and medium-sized market anomaly" is the same.

4. Public equity, insurance funds to increase allocation of Hong Kong stocks and technology, high dividend-paying targets continue to be favored

Public equity funds and insurance funds are still focusing on allocating Hong Kong stocks with high dividend payout targets, and at the same time, they are also significantly increasing their positions in Hong Kong stocks in the technology sector:

• High dividend bonus subject continues to become the "heart of the good" of sound funds.

• With the recovery of AI, smart cars, semiconductors and other industries, the proportion of Hong Kong stocks in the allocation of science and technology sector is constantly rising.

5. Overseas funds: configuration "contradiction", the increment is limited

Although southbound funds continue to increase, the performance of overseas funds is still "hesitant":

• Passive and trading funds (HF) dominated the recent return of funds, but the scale and speed is significantly smaller than the market at the end of September last year.

• Active funds have continued to flow out and have shown no signs of returning further.

This " contradictory configuration " means:

• Passive funds are only tracking market sentiment in stages, but do not have the confidence to enter the market in large increments.

• Active funds remain cautious and wait-and-see.

Therefore, this wave of southward funding is difficult to hold up the big picture, once stopped there will be a pullback.And the follow-up incremental sources of funds are still worrying, the two main possible sources:

• Europe and the United States long-term funds: these funds are more concerned about fundamentals and the long-term stability of the policy, if the foreign capital of the Chinese market is expected to improve, it may bring a new round of incremental.

• Southbound funds continue to increase: If mainland funds continue to be bullish on Hong Kong stocks, southbound funds can still play a stabilizing and boosting role, but their marginal effect is weakening.