Mechanism analysis
CICC: analysis of liquidity and shareholding of hong kong stocks
We try to analyze the recent capital outflow in the Hong Kong stock market from the aspects of the "puzzle" of capital flow, quarterly position information of institutions and macro. On the whole, southbound funds continued the steady inflow trend since the beginning of the year, while active funds began to accelerate their outflow in July. We believe that this round of capital outflow may be affected by the tightening of global financial situation and the reduction of some capital allocation caused by the aggressive interest rate hike by the Federal Reserve. In addition, the short-selling of Hong Kong stocks has also increased significantly compared with recent days. From the perspective of shareholding and chips, the quarterly position data of institutional investors summarized from the bottom up shows that the proportion of positions held by overseas institutions declined in the third quarter. We notice that the absolute scale of this round of foreign capital outflow is less than 20 18-20 19, but it seems to have a greater impact on the stock price, reflecting that the capital flow is not linear with the stock price. Under the pessimistic assumption, we think that if foreign active funds reduce the China allocation of tracking index, it is likely to bring pressure to the market. Looking ahead, if the Fed's policy at the end of the year can be backed down, it is expected to be the first opportunity to relieve the pressure.
Since July, the Hong Kong stock market has continued to weaken under multiple uncertainties. At the beginning of June, the Hang Seng Index fell below the lowest point since 20 1 1 at 65438. The main board transaction was light, the proportion of short selling reached a record high, and the market sentiment was relatively low. Under the background of the continuous tightening of external financial conditions and the more complicated geographical situation, some investors are worried about whether there is a greater pressure of capital outflow.
In the specific analysis process, the existing available data are incomplete (for example, the EPFR fund data only cover investors such as "funds") and the objective constraint of HKEx's non-penetration, which makes it more difficult to grasp the overall investor structure of Hong Kong stocks and the changes of high-frequency capital flow. In order to solve this problem, we try to combine relatively comprehensive information from the aspects of "puzzle" of capital flow (such as interconnected southbound capital, EPFR capital flow, short trading), quarterly position information of institutions, macro (Hong Kong M3, summary balance) and so on. Based on the latest changes, we have the following findings.
Capital flow: Southbound capital continued to flow in, while overseas active capital weakened.
Southbound funds: keep the inflow in the fluctuation, and even accelerate in the near future. Although the Hong Kong stock market has been under pressure recently, the southward capital has continued the steady inflow trend since the beginning of the year, and has basically maintained the daily net inflow trend since June 5438+00. Not only that, but the scale of recent southward capital inflows has even accelerated against the trend. Last week (10, 17-2 1), the total inflow reached HK$ 25.7 billion, the largest inflow in Zhou Du since mid-March (14-1826.3 billion). The specific flow direction is also the characteristic of contrarian jiacang. Since 10, new economic leaders such as Tencent, Meituan, Yao Ming Bio and Li W have been the main influxes. Therefore, it can be seen that southbound funds are not the dominant factor in this round of market volatility.
Overseas funds: the outflow of active funds has accelerated since July. Since July, the overall outflow of overseas active funds has reached 4.5 billion US dollars. In terms of amplitude, this round is still moderate compared with mid-March (outflow of $3.5 billion in three weeks), but this round has a long outflow time, which has lasted for 14 weeks since July (outflow of about $3.6 billion compared with mid-March, April to June1week). In terms of fund types, emerging market active funds (outflow of $3 billion) and Asian active funds except Japan (outflow of $654.38+0 billion) have more outflows. In contrast, passive funds have continued to flow in this year, but the impact on stock market pricing is relatively small from the results.
Chart: Recently, emerging market active funds and Asian active funds except Japan have flowed out of overseas Chinese stocks.
Chart: Southbound capital keeps flowing in all the year round, and it has accelerated recently.
Chart: Since the beginning of this year, overseas China stock markets have experienced three waves of foreign capital outflows.
On the whole, we believe that this round of capital outflow may be affected by the tightening of global financial conditions and the reduction of some capital allocation caused by the aggressive interest rate hike by the Federal Reserve. First of all, the expectation that the Federal Reserve will raise interest rates again since August has intensified the tightening of global dollar liquidity and promoted the return of funds from the overall emerging markets to developed markets. The recent strengthening of the US dollar and the depreciation of major emerging exchange rates can also be confirmed. Year-to-date, the net redemption scale of active funds in emerging markets and active funds in Asia except Japan has risen sharply, reaching $654.38+059 billion and $7.6 billion respectively. Secondly, through the calculation of EPFR data, we find that the overall allocation of overseas active funds in China market is obviously lower than that of passive funds, which reflects that there may be some low allocation behavior of active funds. Among them, the allocation of global funds (except US stocks) and Asian funds except Japan is obviously insufficient, which does not rule out a certain relationship with recent geopolitical tensions.
Chart: EFPR data shows that institutions continue to reduce their China allocation, and the net redemption of active funds is the main reason for China's capital outflow.
Short-selling transactions: Short-selling transactions in Hong Kong stocks have also increased significantly compared with recent days. In addition to the flow of funds, the proportion of short-selling transactions in Hong Kong stocks continued to rise. According to Bloomberg data, the proportion of short-selling transactions in the Hong Kong stock market has gradually increased since July, and has remained at a high level of around 20% since the end of September, and reached a one-day high of 24.5% in the first ten days of 10. In addition, the short position (short position) declaration disclosed by the Hong Kong Securities Regulatory Commission shows that the short position has also increased. As of June 65438+ 10, there were about 680 Hong Kong stocks with short positions, and the proportion of short positions in the total circulating market value was 1.38%, which was higher than the previous week's 1.09% and relatively stable compared with the high point of 1.66% in mid-August.
Chart: The proportion of short-selling transactions in Hong Kong stocks continues to rise.
Changes in ownership structure: the allocation of Chinese capital is basically stable, while the allocation of foreign capital has declined.
From the perspective of shareholding and chips, we summarized the quarterly positions of major institutional investors from bottom to top, showing that the proportion of overseas institutions' positions decreased in the third quarter, while the proportion of Chinese institutions' positions increased. Since HKEx's shareholding data can't penetrate investors, we sort out the investor structure of the top 100 overseas Chinese stocks (including Hong Kong stocks and US-China stocks) by summarizing the quarterly position data of large institutions (including pension funds and hedge funds). The preliminary findings are as follows:
1) Among the shares held by Hong Kong stocks, the shareholding ratio of China intermediaries has been increasing. According to the information disclosed by HKEx, the market share of Chinese intermediaries has increased from 202 11.3% at the end of the year to the current 12%, which is also higher than the high point of 1 1.6% in mid-March. At the same time, the share of the market value of international intermediaries' stocks continued to decline, from 45.3% at the end of 2002/kloc-0 to 43.3% at present. If it is roughly assumed that mainland funds go through more China intermediaries and overseas investors go through more international intermediaries, this change in proportion can indirectly prove the outflow of some overseas funds. A similar conclusion can be drawn by further comparing the changes in market value. For example, the decline in the market value of China's intermediary companies' shares is less than that of overseas and local intermediary companies in China and Hongkong.
Chart: The market value of Chinese intermediaries holding Hong Kong stocks has also increased recently.
Chart: According to the change of the total shareholding of Hong Kong intermediaries, the sales are mainly concentrated in overseas and local intermediaries in China and Hong Kong.
2) In the third quarter, the shareholding ratio of overseas institutions was 34. 1%, which was still the highest overall decline. Since 20021,the shareholding of overseas institutions has been declining continuously. In the third quarter, foreign institutions held 65,438 US dollars +0.46 trillion, accounting for 22% of the total market value of the sample companies and 34. 1% of the circulating market value, which decreased by 1. 1 .2 percentage points respectively compared with the end of 202 1. Comparatively speaking, the shareholding of Chinese-funded institutions was generally stable in the third quarter, accounting for 7.7% of the sample market value and 4.9% of the circulating market value respectively, which was basically the same as that at the end of 20021.
3) The shareholding ratio of pension funds and sovereign funds decreased, but the scale was small. * * * The same fund is still the main body. Recently, reports that some overseas pension funds, sovereign funds and even strategic investors may reduce their exposure to China have attracted attention. In the above sample, we found that the shareholding of overseas pension funds, sovereign funds and other investors did decline, from 3.3% at the beginning of the year to 3. 1% in the third quarter, but the proportion and scale were small. Comparatively speaking, * * * the same fund is still dominant, and its shareholding accounts for 28.6% of the circulating market value, down 1.3 percentage points from the beginning of the year. It can be seen that the impact of potential exposure adjustment on the actual scale of some pensions may be relatively limited, or more reflected in emotional disturbance, or short-term impact caused by a large single scale.
Chart: Foreign shareholding has declined recently, and sovereign funds and pensions account for a small part of overseas Chinese shareholding.
Chart: The stock of shares held by overseas institutions has been declining recently.
Hong Kong dollar and liquidity: pressure from the continuous tightening of the Federal Reserve and the reduction of global "cheap money"
In the context of the Fed's interest rate hike, the outflow of funds led to a decline in the aggregate balance of the Hong Kong Monetary Authority. Under the Fed's interest rate hike cycle, the widening spread between Hong Kong and the United States led to capital outflow pressure. Since the weak guarantee of the Hong Kong dollar was triggered in May 2022, the Hong Kong Monetary Authority has repeatedly intervened to maintain the exchange rate, which has also caused the bank's aggregate balance of more than 300 billion Hong Kong dollars to fall to the current 654.38 billion Hong Kong dollars, and the Hibor interest rate has also increased. Compared with the Fed's interest rate hike cycle of 20 15-20 18, the aggregate balance of this round has dropped rapidly, but the current aggregate balance is still higher than the low point of 20 15-20 18. On the whole, Hong Kong dollar liquidity among banks in Hong Kong is still abundant, and superimposed banks hold more foreign exchange bills, which provides a downside guarantee for Hong Kong dollar liquidity.
From the mechanism point of view, Hong Kong's money supply and stock market are affected by the flow of funds at the same time, and they are highly related. The aggregate balance is a part of Hong Kong's monetary base, and the outflow of funds will directly affect Hong Kong's money supply. In August, M3, Hong Kong's broad money supply, increased by 2.46% year-on-year, down from 4.26% at the end of last year. We find that the trend of Hong Kong M3 and the US dollar index is highly negatively correlated, which shows that when the global risk appetite declines, it will flow out and fall back as the whole emerging market. At the same time, Hong Kong M3 has a high correlation with the trend of Hong Kong stock market, which may reflect the same influence of global capital flows.
Looking forward to the future, considering that under the constraint of high inflation, the Fed's interest rate hike cycle has not yet ended, and the contraction of global "cheap money" and US dollar liquidity may continue for some time, so the external liquidity contraction and even the pressure of liquidity outflow may also cause some disturbance, so pay attention to the changes in the Summary Balance and Hibor.
Chart: The US interest rate hike cycle pushed the capital out of China, Hong Kong and other emerging markets, and the aggregate balance of Hong Kong and China Bank dropped sharply.
Chart: Hong Kong M3 is highly correlated with the performance of Hong Kong stocks.
Stress test: How much pressure is likely to flow out under pessimistic assumption?
Compared with history, what is the scale of this round of capital outflow? The absolute scale is less than 20 18-20 19. According to EPFR data, since 2000, China market has experienced four rounds of overseas active funds outflow. They are: 1)2007-2009 financial crisis (outflow1235 million USD), 2) 201-2013 European debt crisis (6.99 billion USD), and 3). The cumulative outflow of overseas active funds is 100 USD. At the same time, under the influence of stock price on the flow of funds, we estimate that the outflow scale is less than half of the inflow scale during 2020-202 1.
However, the relationship between capital flow and stock price is not linear, and this rotation seems to have a greater impact on stock price. According to EPFR statistics, during the period of 2065,438+03-2065,438+07, the allocation scale of overseas active funds in China decreased by 36.6% from US$ 405.3 billion to US$ 257/kloc-0.0 billion (reflecting the price drop), while the allocation of overseas active funds only decreased by 5.6%. Therefore, the more critical factor to the stock price may be the ownership of pricing power. Considering that overseas active funds have been significantly allocated to the China market (at present, the allocation ratio is about 28%, which is lower than the weight of 3 1% in MSCI Emerging Markets), we believe that the further reduction of kinetic energy by foreign-funded institutions may also slow down without considering other geographical factors.
Chart: The absolute scale of this round of foreign capital outflow is less than 20 18-20 19, but the stock price fluctuates greatly.
Under the pessimistic assumption, if foreign active funds reduce the allocation ratio in the benchmark for various reasons, how much outflow pressure may it bring? If it is assumed that 10% of the investment institutions tracking emerging markets change their performance benchmark to emerging markets other than China (we estimate that about $800 billion of active investment funds are based on the MSCI Emerging Markets Index), with the current allocation ratio of 28%, it may bring capital outflow pressure of $22.4 billion, which is equivalent to twice the outflow scale since the high point of 20021,and will basically give up since 2020. So under this pessimistic assumption, it is likely to bring pressure to the market.
Prospect: under the "triple pressure", it may remain volatile in the short term and wait for the turning point.
We believe that the current funding situation of Hong Kong stocks reflects the "triple pressure" faced by the market, that is, the tightening of the Federal Reserve affects liquidity, domestic growth affects profit expectations, and geopolitical situation affects risk appetite. In the short term, the Fed will still maintain its hawkish stance under the pressure of high inflation, which means that the global risk aversion will continue in the short term, and the current situation of foreign-funded active institutions' substantial low allocation of Hong Kong stocks will be alleviated or they need to find an inflection point in the latter two.
Fortunately, the Hong Kong stock market already has several advantages. For example, at present, the market has fallen to a multi-year low, the valuation has been at a historical low, and the southward funds under the domestic easing policy continue to flow in. This means that overseas Chinese stocks may show greater resilience. If the internal and external environment improves, the Hong Kong stock market is expected to rebound more sharply in the future. Looking ahead, if the Fed's policy at the end of the year can be backed down, it is expected to be the first opportunity to relieve the pressure. The subsequent emergence of more positive catalysts, such as the overweight of large-scale steady growth policies and the mitigation of some risks, may promote the mitigation of low allocation of foreign-funded institutions and the re-pricing of market risks. Based on the above judgment, we believe that Hong Kong stocks may maintain a volatile pattern in the short term, but they may be at the bottom. In terms of allocation, high dividends are used as a hedge against depreciation and risks in the short term, but high-quality growth, especially consumption growth that may benefit from future domestic demand and policy relaxation and repair, can be absorbed and waited for the opportunity. (Source: CICC)