Financial Services News, October 5 (Reporter Yan Jun) Unable to buy A-shares, Hong Kong stock ETFs that track the A-share index have become the strongest alternative.

Throughout the holiday season, Hong Kong stock ETFs became a financial playground. Hong Kong stock ETFs tracking the Science and Technology Innovation Board once soared to 234% in the intraday market. The high increase also concealed high risk. The decline in premiums disappeared, causing Dan Bin to warn of “a sharp decline after a sharp rise.”

Three Hong Kong stock ETFs double their weekly gains

Hong Kong stocks were closed for only one day on October 1, continuing their strongest rebound. Many indices only took 5 trading days to recover lost ground during the year. Take the pharmaceutical sector as an example.$Hang Seng Hong Kong-Listed Biotech Index (800805.HK)$It rose 24.9% in the past 5 days, and the yield changed to 5.78% during the year. $Hang Seng Healthcare Index (800804.HK)$ The yield for the same period was 23.66%, and the yield for the year was 2.98%. Under the general rise, the yield of all major Hong Kong stock indices closed positive during the year.

Hong Kong stock ETFs, which had a low presence before, have a strong presence during the National Day holiday.

On the morning of the 2nd, the Southern East England Science and Technology Innovation Board 50 Index ETF soared 234.3%. The fund company issued an urgent intraday risk warning. There were trading risks such as large premiums in the secondary market, and the increase fell back to 29% before closing. Still on that day $Bosera STAR 50 Index ETF (02832.HK)$ , $Bosera SZSE Chinext Daily (2x) Leveraged Product (07234.HK)$ The fund closed up with gains of 106.19% and 60.22%.

By the 3rd, there was a slight correction in Hong Kong stocks. ETFs showed a slight calm, and many ETFs had pulled back. By the 4th, Hong Kong stocks rose strongly again, and the semiconductor sector exploded. $Bosera Star 50 Index ETF-R (82832.HK)$ ,$Global X China Semiconductor ETF (03191.HK)$ETFs increased by 28.83% and 12.44%, respectively.

Judging from the rise and fall rate in the past 5 days, ETFs tracking the A-share index had the highest increase. Among them, $Bosera SZSE Chinext Daily (2x) Leveraged Product (07234.HK)$ , $Bosera STAR 50 Index ETF (02832.HK)$ , $Bosera Star 50 Index ETF-R (82832.HK)$ The increase doubled in the past 5 trading days, reaching 159.73%, 114.86%, and 101% and 82% respectively. Additionally, it also includes $CSOP STAR 50 Index ETF (03109.HK)$ , $CSOP CSI 300 Index Daily (2x) Leveraged Product (07233.HK)$ , $Premia China STAR50 ETF (03151.HK)$ Eight ETFs rose more than 50%.

Unlike mainland ETFs, there are more types of Hong Kong stock ETFs, including various products such as leverage and inverse. Take the XL Second Expo China Venture ETF as an example. The full name is Bosch China GEM Index Daily Leverage (2X). According to Bosch International, this product is the first China GEM leveraged product in Hong Kong. The product aims to use a synthetic simulation strategy based on swaps, that is, by buying this product, you can achieve a positive return of 2 times the daily performance of the target index.

As for the reason for the sharp rise in this product, Bosch International Review pointed out that favorable macroeconomic policies continue to be the main reason. Following the central bank's commencement of interest rate cuts, the Politburo meeting announced that it would step up fiscal adjustment efforts while emphasizing the need to “stop falling and stabilize” real estate. Afterwards, the People's Bank of China issued an announcement announcing a batch reduction in interest rates on deposit and loan mortgages for the first and second units, while first-tier cities such as Shanghai, Guangzhou, and Shenzhen relaxed purchase restriction policies.

The above combination policy has significantly improved investors' market sentiment and raised investors' risk appetite to a large extent, and the policy's encouragement of patient capital helps promote long-term capital entry into emerging industries and high-tech sectors. According to recent high-frequency data compiled by brokerage firms, demand for terminals such as semiconductors and consumer electronics has improved marginally, and the manufacturing industry, which has a good supply pattern, and the technology sector related to new quality productivity has also achieved positive month-on-month net profit growth for the past two consecutive quarters.

Bosch International also believes that with the arrival of the disclosure of the third quarterly report, the correction of performance combined with the increase in investor preferences is expected to push GEM and the Science and Technology Innovation Board, which have been at the bottom of valuation for a long time, to achieve valuation restoration. It is recommended that attention be paid.

ETFs have soared. On the one hand, capital purchases continue, and on the other hand, net worth is also increasing. The size of related ETFs has also repeatedly reached new highs. On October 2, the asset management scale of the Southern Dongying Hang Seng Technology Index ETF exceeded HK$40 billion; on the 4th, Huaxia Fund Hong Kong said that its Huaxia Hang Seng Index ESGETF scale exceeded 10 billion.

However, some industry insiders believe that in the case where A-shares are not open, the increase in Hong Kong stock ETFs that track A-shares individually is already too high, and investors need to pay attention to risks such as premiums and cooling sentiment.

Chinese assets are being bombarded

One rise solves a thousand worries. Since the Federal Reserve cut interest rates, overseas capital has clearly flowed back into Hong Kong stocks. With domestic monetary policies that have exceeded expectations, it has also set off a surge in A-shares and Hong Kong stocks. During the National Day holiday, Hong Kong stocks were closed for only one day. Throughout the holiday, Hong Kong stocks attracted the attention of global investors. Despite a one-day pullback, the decline was quickly recovered.

As of the close of trading on October 4, while the A-share market was closed, judging from changes in the global market, Chinese assets continued to be bombarded. Comparatively speaking, in US stocks$S&P 500 Index (.SPX.US)$The increases in the range of the NASDAQ 100 Index were 0.23% and 0.15%, respectively, while$NASDAQ Golden Dragon China (.HXC.US)$The ranged increase was 11.54%; FTSE China's three-fold increase in ETFs surged by nearly 34%; in terms of Hong Kong stocks, the Hang Seng Index rose 7.55%, with the highest increase in dividend assets for central enterprises, and the Hong Kong Stock Connect central enterprise dividend surged 12.64%.

Overseas investment institutions are also keeping a close eye on Chinese assets. Throughout the holiday season, domestic and foreign investment institutions' conference calls, research reports, and trading desk information continued to pop up.

Nomura Securities pointed out in an October 2 research report that this policy incentive was quite successful, and believes that the government will definitely have a series of fiscal measures and other supporting policies in the future. However, Nomura also cautioned that individual investors, especially those who are too young to experience the painful rise and fall before, are rushing to open accounts and are worried about missing out on what seems like a lifetime rebound. Investors may need to watch out for the worst after enjoying the initial binge.

However, more foreign-funded institutions have given relatively optimistic views. Damo's short-term opinion points out that market sentiment towards China has changed in the past week, and positions have also been marginally adjusted, but there is still room for further adjustments. Recent retail investors have mostly come in the form of ETFs gaining broad BETA exposure, rather than a single stock. CTA has bought an estimated $15 billion in Chinese stocks over the past two weeks. Meanwhile, Damo pointed out that demand for bullish options has reached a record high.

However, it is worth noting that hedge funds are also buying Chinese stocks, but most of the demand comes from Asia-Pacific accounts, and US accounts are still more or less on the sidelines.

The Bank of America Securities Trading Desk gave opinions on recent A shares, Hong Kong stocks, etc. in response to 8 questions from customers. First, with regard to whether China's assets are under-valued, Bank of America Securities believes that in the past two weeks, long-term investors made a net purchase of 3.4 billion. This is similar to the amount purchased during the previous post-pandemic rebound, but the time was much faster. Until mutual fund shareholding data for September and October is obtained, it is difficult to quantify positions, but judging from trading traffic, the current positions allocated to Chinese assets are already quite full.

As to whether to buy A shares or Hong Kong stocks now, Bank of America Securities believes that the current forward-looking price-earnings ratio of Hong Kong stocks is close to 10 times, and the passive-driven rebound exceeds expectations, but the return on risk is not very attractive; if the judgment on the emergence of animal mentality among market participants and the similarity of the 2014-2015 bull market is correct, the valuation of A shares may be greatly overvalued compared to H shares.

“Although foreign holdings in H shares have increased rapidly, domestic retail investment has only just begun. On September 30, the volume of securities financing accounted for more than 10% of the total turnover, but it is still far lower than 18% in 2014.” Bank of America Securities pointed out.

Editor/Somer