20180905-中国银河国际证券-Southbound_Stock_Connect__Net_Buying_Re-mained_Strong_for_ICBC___ABC_7页_1mb

Southbound Stock Connect Summary

Core Content Overview

This report analyzes the activity of Southbound investors in the Hong Kong stock market through the Stock Connect program, highlighting both net inflows and outflows for specific stocks in August 2018. It also notes the overall market conditions and the valuation levels of selected stocks.

Key Observations

Overall Market Activity

• Southbound investors experienced a net fund outflow of HK$27.7 billion in August, marking the largest single month outflow of the year.
• In July, there was a net inflow of HK$1.9 billion, but this was followed by a significant drop in August.
• The Hang Seng Index declined by 2.4% in August, indicating a weak market environment.

Strong Net Inflows to ICBC and ABC

• ICBC (1398.HK) saw a net inflow of HK$1.65 billion in the past two weeks.
• ABC (1288.HK) had a net inflow of HK$466 million in the past two weeks.
• Both stocks outperformed the Hang Seng Index in August.
• They are currently trading at undemanding valuations with PBRs of 0.8x and 0.72x, respectively.
• Bank of China (3988.HK) saw a net outflow of HK$1.18 billion, and the stock underperformed, dropping 4.1% in August.

Tencent Selling Pressure Easing

• Tencent (700.HK) experienced a large net outflow over the past two months.
• The aggregate stake held by Southbound investors decreased from 1.84% to 1.20%.
• Selling pressure has eased in the past two weeks, with a net outflow of HK$3.8 billion compared to HK$14.4 billion in the previous month.

Kingsoft (3888.HK)

• Southbound investors resumed net buying in the past two weeks, with a net inflow of HK$214 million.
• The share price increased by 5.4% in the past two weeks.

Education Stocks

• Southbound investors began aggressively buying education stocks after a sharp correction due to policy risks.
• China Education (839.HK) saw a net addition of 0.89%.
• China New Higher Education (2001.HK) had a net addition of 0.61%.
• Yuhua Education (6169.HK) saw a net addition of 0.55%.

Hua Hong Semiconductor (1347.HK)

• Southbound investors sold a 1% stake in the past two weeks.
• The report also highlights a sharp increase in short positions for this company in the latest weekly analysis.

Summary of Key Points

• Strong net inflows to ICBC and ABC despite the overall market weakness.
• Significant net outflows to Tencent, but selling pressure has eased recently.
• Net buying resumed for Kingsoft, with a sharp price increase.
• Education stocks saw a resurgence in buying interest following a correction.
• Hua Hong Semiconductor experienced net selling, with a notable rise in short positions.
• Valuation levels of ICBC and ABC remain undemanding, with PBRs of 0.8x and 0.72x respectively.

Summary of Key Stocks

Conclusion

The report underscores the divergence in investor behavior across different sectors and stocks. While the overall market faced significant outflows, ICBC and ABC remained strong performers with continued net inflows. Tencent saw reduced selling pressure, and Kingsoft and education stocks experienced resurgence in buying. Hua Hong Semiconductor was under selling pressure, indicating increased short selling. The valuation levels of ICBC and ABC are low, making them attractive investment options.