HK market is the happening place

The introduction of "H share holistic circulation" (H股全流通) and "shareholding rights" (同股不同权) reforms by the Hong Kong Stock Exchange will give Hong Kong stocks two extra weapons as far as the mainland investors are concerned.

Holistic circulation of H-shares means that mainland domestic-funded shares that could not be traded in the Hong Kong stock market previously will become tradable. This reform will involve funds with a total market capitalization of about HK$2.6 trillion, and most of them belong to State-owned shares. The total circulation of H shares will provide the China government a channel to solicit funds from investors from the HK Stock Exchange. Apparently, it is far-fetched that the China government would want to see a stock market plunge or any turmoil in the HK stock market this year to undermine their golden plan.

Currently, it is even more pressing to introduce the reform of accommodating different rights in the same share of a stock, otherwise the giant new economy stocks, such as Alibaba and Baidu before the reform, will go for IPO in the United States.

HKEx (388.HK) has been tasked with this national mission to get the most promising stocks to be listed in the HK Stock Exchange. If there is a crash in the HK market, the mission of HKEx is difficult to be accomplished.

Singapore Stock Exchange (SGX) has also announced its intention to introduce dual-class shares and unveil debt issue plans. But HKEx is definitely ahead of the game with Shanghai-HK Stock Connect （沪港通）and Shenzhen-HK Stock Connect （深港通） and its total market capitalisation is more than five times that of SGX's. 

HKEx (388.HK) daily chart: Bullish!

From fundamental analysis, the valuation of HK stocks is still cheap. When HSI was at its peak of 31,908 in 2007, the average p/e was 21.5x. The average p/e of today’s HSI of 32,254.89 is only 15x. The earnings yield is 6.67% which is much higher than the risk-free fixed deposit interest rates with commercial banks. 

The current uptrend of the stock market bellwether, 388.HK, is the confirmation of the bullishness of the HK market which has been and will be the happening market for a long time to come.  There are still laggards to be picked for the bullish ride. Read my earlier posts to get some of them, e.g. 717.HK, 2828.HK,  85.HK and 6166.HK.

I strongly believe that any pullback will be an opportunity for investors to jump on the fast-moving bandwagon. Happy investing!

Superphang

https://superphang.blogspot.sg