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Written by: Chen Xunlin
2021-02-28 20:51
The last update date: 2021-02-28 21:01
As the mainland's capital market has become more open to the outside world, the mainland's asset allocation methods have also changed.
In 2020, the southbound net inflow of southbound stocks will reach 600 billion yuan, and the total stock market value will increase by 959 billion yuan, helping the Hang Seng Index to stabilize above 27,000 points at the end of last year; entering 2021, "North Water" (Mainland China) Capital) continued to move southward, driving the Hang Seng Index to break through the 30,000 mark in January.
Although Hong Kong stocks may have been dragged down by the news of US debt interest and Hong Kong's proposed stamp duty increase, causing the market to suddenly turn down, the analysis generally believes that the bull market has not ended.
The tremendous changes in the international political and economic landscape, coupled with the support of the "North Water South" national policy, will bring much potential for the redevelopment of Hong Kong's financial market?
How should the Hong Kong Stock Exchange, which "relies on the country and faces the world", take this opportunity to expand reforms and actively embark on a new stage in history?
Mainland funds went southward to build positions, and only last week did they show signs of slowing down.
Statistics show that the cumulative net inflow of "Beishui" in January this year was 310.6 billion yuan, which is about half of last year's net inflow (672.1 billion yuan), which has driven the development of individual Hong Kong stocks, such as Tencent Holdings (0700) and Meituan Leading stocks such as Dianping (3690) surged 20% in the month. Under this trend, the Hong Kong stock market will attract more mainland funds.
The inflow of north water has driven the development of individual Hong Kong stocks. Leading stocks such as Tencent Holdings (0700) and Meituan Dianping (3690) surged 20% in the month.
(Data Picture / Photo by Deng Qianying)
With the help of institutional investors such as public funds, private equity funds, insurance companies, etc., mainland funds continue to flow into Hong Kong stocks through Southbound Stock Connect. Beishui, especially public funds backed by the government, is more important in the Hong Kong stock market.
In recent days, both the issuance of public funds in the Mainland and the speed of southward migration have accelerated significantly.
According to CICC data, as of February 5 this year, there were 7,541 public funds in the Mainland, with a total size of RMB 20.18 trillion, of which 1,095 were non-monetary public funds that can invest in Hong Kong stocks (the proportion of Hong Kong stocks is about 0% to 80%) , With a total scale of 2.67 trillion yuan, 623 more than in 2019.
As of the end of last year, public equity fund holdings in Hong Kong stocks increased by RMB 269.4 billion, and the market value of holdings reached RMB 344.7 billion, accounting for 16.4% of the value of Southbound Stock Connect Hong Kong stocks, an increase of 9.8 percentage points from 2019. In other words, public funds have become the main buying power of Hong Kong stocks.
CICC predicts that mutual funds will increase their holdings of Hong Kong stocks by an average of RMB 2,500 to 350 billion each year, accounting for one-third to half of the total southbound inflows of Southbound Connect, and the proportion of Hong Kong stocks will increase from 15.8% at the end of last year to 25% to 30%. %.
For many investors, Hong Kong’s valuation is low. Both the price-earnings ratio and valuation are low. In addition, the Hong Kong Stock Exchange has given the green light to allow some biotech and new economic technology stocks sought after by the local market to be included in the interconnection. Within the scope of stock selection, and the HSI reform has also made individual stocks more passive funds to pursue.
"Hong Kong is an enlarged B-share market." said Feng Zhijian, former managing director of BOCI Securities and permanent honorary chairman of the Gold and Silver Exchange.
Hong Kong has long become the first overseas financing center for mainland enterprises. In the past ten years, the total amount of IPO financing in the Hong Kong market has exceeded HK$2.3 trillion, ranking first in the world, most of which are financing for mainland enterprises.
Feng Zhijian has been engaged in banking and financial business for more than 40 years. He has also held a number of public positions, including the vice chairman of the Hong Kong Stock Exchange and a director of the Hong Kong Futures Exchange. He not only witnessed the financial development of Hong Kong, but also participated in it.
He said that Hong Kong's financial market played an important role both before and after the handover. As early as the 1970s, it had begun to develop foreign exchange, stocks, gold and other businesses, and also provided a variety of financial products and financial investment tools.
Feng Zhijian, who was once the vice chairman of the Stock Exchange, was one of the promoters of introducing H shares to Hong Kong for listing.
He explained that before that, mainland companies must register overseas and then list in Hong Kong in the form of red chips.
At that time, the Hong Kong stock market was weak and required cross-border listing experience; while the Shanghai and Shenzhen stock exchanges in the mainland just started, mainland enterprises needed a lot of capital and hoped to have a platform to raise funds. After many months of preparation, Tsingtao Brewery launched its business on July 15, 1993. Japan became the first mainland company to be listed in Hong Kong, opening the door for direct listing in Hong Kong. Since then, a large number of mainland companies such as state-owned enterprises, private enterprises, and state-owned commercial banks have come to Hong Kong for listing.
Why do mainland funds choose to invest in Hong Kong?
In addition to the low valuation of Hong Kong stocks and opportunities for arbitrage, Feng Zhijian believes that there are also high quality stocks, exchange rate factors, capital flows and asset attractiveness.
(Profile picture)
B-shares refer to mainland corporate stocks quoted in Renminbi. They were initially available for foreign investors to subscribe and trade in foreign currencies. After February 2001, they were opened to mainland residents to buy and sell stocks in foreign exchange. Unfortunately, the B-share market is small in size and less trading. , Weak liquidity and financing functions, coupled with open market measures such as increasing the investment quota of Qualified Foreign Institutional Investors (QFII) and opening interconnection, have gradually marginalized B shares.
Feng Zhijian said that the size of the mainland's B-share market is too small and the industry continues to upgrade and replace B-share companies. In Hong Kong, companies can use Hong Kong dollars linked to the US dollar to raise funds. "In fact, the largest B-share market is in Hong Kong. "
Why do mainland funds choose to invest in Hong Kong?
In addition to the low valuation of Hong Kong stocks and opportunities for arbitrage, Feng Zhijian believes that the quality of stocks, exchange rate factors, capital flows and asset attractiveness have also attracted mainland investors to invest in Hong Kong stocks in a disguised form to share the fruits of corporate growth.
"The Mainland has many inherent conditions and limitations. Hong Kong is an important bridgehead connecting Western financial markets." Compared with other markets, Hong Kong's financial market is relatively complete, coupled with more than 20 years of talent accumulation and a recognizable legal basis. For the Mainland, Hong Kong's financial market is very important.
Feng Zhijian explained that the "inside and outside the customs" model allows Hong Kong to not only act as a role in attracting capital, but also to introduce capital and talents from overseas enterprises into the customs. With the increasing reform and opening up of the mainland, it will also bring the funds and talents of enterprises in the customs out of the country. Turning to two-way, from inviting in to going out, these are not only the continuous development of Hong Kong's financial market, but also the function of market position.
In addition, the Hong Kong Stock Exchange learned a lesson from the Alibaba incident and revised the Main Board Listing Rules in April 2018 to allow unrecorded income, profitable biotech companies, and new economic companies with the same shares and different rights to list in Hong Kong. These The work provides suitable soil for the transformation of the Hong Kong stock market and the world's financing ecology. Since the reform, the Hong Kong Stock Exchange has recorded more than 90 new economy companies listed.
In the "Budget" published by Financial Secretary Chen Maobo last Wednesday (February 24), the authorities reiterated that the Hong Kong Stock Exchange would review the overall secondary listing system, including whether Greater China companies with non-same share and different rights structures need It is an innovative technology company and corresponding market value requirements. In the future, more secondary listed shares may be included in the Southbound Stock Connect, and after the implementation of the "New Stock Connect" that allows investors in both mainland and Hong Kong to subscribe to the other party to issue new shares, And trading activities will have a positive impact.
In the case of Alibaba, the Hong Kong Stock Exchange learned a lesson and amended the Main Board Listing Rules in April 2018 to allow unrecorded income, profitable biotech companies and new economy companies with the same shares and different rights to list in Hong Kong.
(Photo by Ou Jiale)
Capital internationalization products are slightly single
Feng Zhijian pointed out that Hong Kong's funding sources are very international, but the products are slightly single.
The Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect were launched in 2014 and 2016, which expanded the RMB investment channels for Hong Kong investors and the liquidity of the local stock market, and consolidated Hong Kong's development as a global offshore RMB business hub.
With the removal of the quota limit and the broadening of the stock selection range, trading is booming.
In the five years since the Shanghai-Shenzhen-Hong Kong Stock Connect was launched, the northbound inflow amounted to 1.01 trillion yuan, and foreign equity holdings reached 1.44 trillion yuan. In the past two years since the opening of Bond Connect, more than 3.8 trillion yuan of transactions have been concluded.
However, the "Spot Market Transaction Research Survey 2019" of the Hong Kong Stock Exchange pointed out that foreign investors accounted for 43.3% of the transaction volume, reflecting that foreign investors are still actively buying Hong Kong stocks and allocating assets.
For example, with reference to the Monetary and Financial Stability Semi-annual Report issued by the Monetary Authority in September last year, Hong Kong Exchange was affected by stock-related demands such as IPO fundraising activities, southbound capital inflows under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. From April 21 to September 22, due to strong exchange guarantees, 50 times were triggered. The HKMA sold a total of RMB 168.5 billion under the linked exchange rate system. The balance of the local banking system increased from RMB 54.3 billion at the end of February to September. 242.5 billion yuan on the 24th.
As of January 27 this year, the balance of the Hong Kong banking system reached a historical high of about 457.5 billion yuan.
In May last year, the US Senate passed the "Foreign Companies Accountability Act", prompting Chinese concept stock companies to consider returning to the Hong Kong or A-share market.
Hong Kong’s financial market has free flow of funds and a stable linked exchange rate. The three-year survey conducted by the Bank for International Settlements shows that Hong Kong is the second largest foreign exchange market in Asia and the fourth largest in the world in 2019. This background, coupled with a convenient listing system and international The regulatory system of sexual securities has made Hong Kong the preferred option for the return of Chinese concept stocks or the listing of mainland companies.
These conditions have brought opportunities to the Hong Kong market. As of the end of September last year, the Hong Kong stock market was ranked third in Asia and fifth in the world in terms of market value.
As of the end of last year, there were 2,538 listed companies in Hong Kong, with a total market value of US$6.1 trillion.
In the minds of the public, "International Financial Center" has long become synonymous with Hong Kong. "If you only talk about the banking system, many large, medium and small banks also come to Hong Kong to open offices and branches. From the perspective of banks, Hong Kong is very international.化的.” But if you only talk about the stock market, it’s another matter.
Feng Zhijian said frankly that when more and more mainland capital and mainland business-based companies come to Hong Kong for listing, the word "international" is exaggerated in terms of number and market value.
"International Financial Center" has long been synonymous with Hong Kong, but if we only talk about the stock market, it is another matter.
(Profile image/Getty Images)
"Domestic enterpriseization" of Hong Kong stocks is difficult to cope with national policies
In the just-released HSI quarterly review, the number of constituent stocks in the HSI has increased to 55, of which 36 are only Chinese stocks, changing or even leading the structure of Hong Kong stocks.
Direct investment from the Mainland to Hong Kong is increasing day by day. As of January this year, there are 2,545 listed companies in Hong Kong, with 1,326 Chinese stocks, including 291 H shares, 177 red chips and 858 private company stocks. Chinese stocks are gaining market share in Hong Kong stocks. , Accounting for 51.2% of the entire Hong Kong stock market, market value and transaction value each accounted for 78.9% and 87.1% of the total shares. From 1993 to 2020, mainland enterprises raised more than US$934.7 billion in Hong Kong through the issuance of stocks.
On the other hand, companies in other regions are not active in listing in Hong Kong. For example, in the past, only Uniqlo parent company Fast Retailing (6288), Japanese pachinko operator Dynam Japan (6889), and Israeli medical beauty equipment supplier Fu Rui Medical Technology (1696) ), Italian luxury brand Prada (Prada, 1913), etc. came to Hong Kong for listing.
"You can't count the few (non-Chinese-funded companies listed in Hong Kong), and their trading is not active. Of course, this is related to the investment orientation of funds, or the company has its own market in the local market, so there is no need to come to Hong Kong to list. "Hong Kong has become an important offshore fund-raising center for mainland enterprises, but Feng Zhijian believes that if Hong Kong's financial market wants to comply with national policies, today's development cannot be said to be sufficient.
How to attract more regional and international companies to list in Hong Kong?
If you want to become a true international financial center, you can't just look at the mainland.
Feng Zhijian explained that whether it is the "One Belt One Road" initiative that connects Central Asia, India, Pakistan and other places, or last November, China, the ten ASEAN countries, Australia, Japan, South Korea and New Zealand signed the "Regional Comprehensive Economic Partnership". The Agreement (RCEP) can help promote the regional economy. Whether it is a joint venture or a wholly Chinese-owned enterprise engaged in local activities, there may be financing needs. This is a great business opportunity for Hong Kong, but it depends Can Hong Kong laws and regulations accept: "Regarding regional and international perspectives, how can local infrastructure companies with Chinese-funded background raise funds in Hong Kong? These are our market spaces." China is the largest economy in RCEP, and signing RCEP is expected International RMB trade settlement and investment provide a favorable environment and raise the level of RMB use in the region.
Hong Kong stocks greet the big era
Beishui strongly supports the Hang Seng Index of Hong Kong stocks to stabilize at 30,000 points
In 2001, the State Council first proposed to build Shanghai into an international financial center. After years of planning, Shanghai's financial services have become an indispensable part of international trade. In recent years, the Shanghai-London Stock Connect has been actively promoted.
However, financial controls such as renminbi exchange and entry and exit are still Shanghai’s sore points. Feng Zhijian believes that when Shanghai has not yet come to the fore, Hong Kong should pay attention to the changes after local liberalization of policies: "They have failed to break through some of the existing systems, so Hong Kong should take the opportunity to strengthen itself and keep it safe. We also need to develop our own position, and we can’t just hold on to it.” Shanghai, Shenzhen and other inland cities have restricted the development of the local market due to the inability to convert and enter and exit the renminbi. Hong Kong is the world’s largest offshore renminbi settlement center with a scale of over 7,000. In the first 11 months of 2020, the value of RMB trade settlement transactions processed in Hong Kong exceeded 570 billion RMB, an increase of 20% over the same period in 2019.
How Hong Kong can better manage and consolidate its position as a global offshore RMB business hub is obviously an important issue in the process of promoting the further development of the local financial industry.
Hong Kong has become an important offshore fund-raising center for mainland enterprises, but if you want to cooperate with the development of national policies, you must not only focus on the mainland, but also look at the world.
The above is excerpted from the 254th "Hong Kong 01" Weekly Report (March 1, 2021) "How will the political and economic changes move from the north to the south to promote Hong Kong's finance to a new level? ". If you want to read the full text, please
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