To The Moon

The news of the Hong Kong market entering a technical bull market prevails. Indeed, the HK stock market and China’s ADRs may become the most certain opportunity in this year-end.

Let's find why the HK and China stocks will continue go higher:

1. Two favorable policies for China's economy

1) Pandemic policy will ease

In Nov, the government issued new 20 articles related to pandemic control, which show signs of relaxing. The strong Hong Kong stock market and Chinese stocks are partly boosted by pandemic relaxing policies.

It's rumored that China will fully relax the pandemic policy in March, 2023.

The $HSI(HSI)$ has rallied 15% since the release of the 20 articles from November 11.

2) Real estate economic policy

Real estate is one of the pillar industry in China's economy.

China has introduced new 16 articles for real estate to help related companies navigate through the crisis. This is the third large-scale bailout in China's history.

The major banks granted hundreds of billions of loans to the real estate industry and the industry debt crisis was lifted.

2. The polarity of stock performance and bearish news will drive the market higher

The recent foreign media coverage of the situation in China has been very negative, but this is good for the market. Because the negative news will surely make foreign investors like Ackman to short China. A bull market needs short-sellers to contribute.

Right now the US capital markets are confused about the Chinese market:

Mainstream media posted negative news of China (especially photos)

But Hong Kong stocks and China's ADRs are performing better than US stocks

Since the $HSI(HSI)$ rally on Nov. 11, the HSI has gained much more than the $S&P 500(.SPX)$ .

3. Institutional investors' confidence increased - Pick which Chinese stocks?

(1) JPMorgan Funds - China Fund increased its position in Chinese internet stocks in October.

The fund's latest size is about $5 billion, making it the top-ranked China equity fund overseas in terms of size.

In October, the fund added numerous Chinese Internet stocks:

18.11% in $Alibaba(09988)$ , 3.47% in $TENCENT(00700)$ , 4.05% in $JD-SW(09618)$ , 4.3% in $PING AN OF CHINA CSI HK DIVIDEND ETF(03070)$ , 1.59% in $Meituan(03690)$ , 1.76% in $Pinduoduo Inc.(PDD)$ , and 1.91% in $NetEase(NTES)$ .

Source: Morningstar

As of the end of October, the fund's top 10 long positions include $TENCENT(00700)$ , $Meituan(03690)$ , $Alibaba(09988)$ , $JD.com(JD)$ , $Pinduoduo Inc.(PDD)$ , $NetEase(NTES)$ , $PING AN OF CHINA CSI HK DIVIDEND ETF(03070)$ , $China Merchants Bank Co., Ltd.(CIHKY)$ , and $WUXI BIO(02269)$ .

(2) Fidelity funds - China Consumer Fund (latest size $3.7 billion) also added to its position in Alibaba at the end of October.

As of the end of October, the fund's long positions included $TENCENT(00700)$ , $Alibaba(09988)$ , $Kweichow Moutai Co.,Ltd.(600519)$ , $Meituan(03690)$, $MENGNIU DAIRY(02319)$ , $AIA(AIA)$ , $Galaxy Entertainment Group, Ltd.(GXYEF)$ , $PING AN OF CHINA CSI HK DIVIDEND ETF(03070)$， $JD-SW(09618)$ , and $TRIP.COM-S(09961)$ .

Source: MorningStar

(3) Two China’s companies posted stellar earnings

I. $Bilibili Inc.(BILI)$ posted Q3 earnings before Nov 29.with an unexpected 10% surge before the earning. 

Q3 results beat expectations in terms of revenue and profit.

II. $Pinduoduo Inc.(PDD)$ posted third-quarter results showing a 546% jump in net income, and its shares rose more than 15%.

The HSI has rallied 15% since the rally from November 11. But even with a 15% rally in 20 days, $HSI(HSI)$ is still at a low level, compared to the previous crisis.

All of these favorable terms make HK stock market and China's ADRs the most certain opportunity in the year-end.

Do you have plan to invest in China's stocks?

Which company do you plan to add?

Do you think its rally can be sustained?

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