Chinese investors buy the dips even as Hang Seng Index ends August as world’s worst performer
- Mainland traders have bought Hong Kong stocks for 31 days in a row, pumping a total of US$8.9 billion
- The Hang Seng Index’s 7.4 per cent plunge in August makes it the worst performer among the world’s major stock gauges
Mainland investors are unfazed by the downbeat mood clouding Hong Kong’s stocks – the worst performer among the world’s major markets this month.
While the Hang Seng Index dropped 7.4 per cent in August amid civic unrest rattling the city and escalating US-China trade tension, mainland traders have been buying the stocks for 31 straight days through Friday. The buying binge matched the last such stretch in February last year.
Over the past six weeks, Chinese investors have spent a total of HK$70 billion (US$8.9 billion) buying shares through the exchange link programmes, according to Bloomberg data.
While the bearish camp says Hong Kong stocks may still have more downside room to run, with ongoing protests dimming the economic outlook by curbing consume spending and deterring tourists, the bulls argue the city’s equities were already the cheapest among the world’s major markets based on the price-to-earnings ratio, mostly pricing in the pessimistic scenario.
The Hang Seng Index was valued at 10.4 projected earnings for this year, compared with 17.4 times for the Dow Jones Industrial Average and 11.2 times for the Shanghai Composite Index, Bloomberg data showed.
Hong Kong stocks trade at a 22 per cent discount to the mainland-traded shares, according to a gauge tracking the price discrepancy between the two markets.
Among the 114 stocks that have dual listings, all mainland-listed shares were more expensive than the ones trading on the city, except Anhui Conch Cement and Bank of Qingdao. Luoyang Glass had the widest price gap, with the Shanghai-traded shares almost seven times as expensive as the H shares.
Mainland buying concentrated on banks, insurers and technology companies, according to Haitong Securities. Financial companies, property developers and consumer stocks have an edge in valuation against their mainland-traded counterparts, the brokerage said.
