Mainland Chinese investors chase 15 per cent tech rally in Hong Kong, as Pictet and Citic say stocks are attractive again
- Tencent and Kuaishou Technology are at the top of mainland investors’ shopping lists
- In the long term and relative to other stocks, Chinese shares are attractively valued, Pictet chief strategist says
“In the long term and relative to other stocks, Chinese stocks are attractively valued, according to our model,” said Luca Paolini, chief strategist at Pictet.
The revived appetite for China’s technology stocks, which are still reeling from Beijing’s unprecedented regulatory crackdown, is being viewed as reflecting the belief among some investors that the six-month slump had already priced in the worst to come. While Citic Securities, China’s biggest publicly traded brokerage, forecast a limited downside room to run, Switzerland-based Pictet said that Chinese stocks were already a long-term buy.
The net buying of Tencent has totalled HK$2.5 billion (US$324.2 million) so far this month, adding to an inflow of HK$5.5 billion in August, according to data provided by the Hong Kong exchange. Net inflows to Kuaishou amounted to HK$1.4 billion within just three trading days after the stock became available for trading by mainland investors through the Stock Connect, the data shows.
Tencent rose 2.1 per cent to HK$515.50 on Tuesday, taking to 22 per cent its gains from a nadir on August 19. The WeChat operator trades at 25.6 times earnings, compared with a five-year average of 43 times. Kuaishou, the city’s biggest initial public offering this year, jumped 9.3 per cent to HK$$101.90, closing above the HK$100 gateway for the first time in a month. The stock still remains 75 per cent off a record high set in February.
Even after the run-up, the 30-member Hang Seng Tech Index is valued at 20.5 times earnings, compared with a historical average of 29 times, according to Bloomberg data. The broader Hang Seng Index trades just above its book value and a breach of the mark is typically followed by decent rallies based on historical data.
Buying has been selective, however, with mainland investors shunning companies with regulatory overhang. They have sold a combined HK$211.1 million worth of shares in Meituan in September. The food delivery giant is still being investigated by the government.