South Korean retail investors are shifting money into Hong Kong-listed stocks, pulling back from mainland China amid weak fundamentals and Beijing’s reluctance to deliver fresh stimulus.
Korean investors net purchased $24.2 million worth of shares listed on the Hong Kong exchange in the first five sessions of September, snapping their selling spree over the past three consecutive months, according to Korea Securities Depository data on Monday.
In the same period, they net-sold $27.8 million worth of mainland China-listed shares, a sharp reversal from $36.6 million in net purchases a month earlier.
China’s benchmark Shanghai Composite Index fell 2.9% from Sept. 2 to 4 after Beijing signaled plans to curb speculative trading, further dampening sentiment following a Victory Day parade in Tiananmen Square marking the 80th anniversary of the end of World War II, which prompted profit-taking.
Margin trading balances in China reached 2.3 trillion yuan ($322.8 billion) on Sept. 3, the day of the parade, marking the highest level since 2016, noted Park In-geum, an analyst at NH Investment & Securities Co.
“Heavy use of leverage is amplifying market volatility,” she added.
Lingering concerns about a slowdown in the world’s second-largest economy and deflation are also weighing on investor sentiment.
ROSIER OUTLOOK FOR HONG KONG STOCKS
Market analysts expect tech stocks listed in Hong Kong to extend their rally for a while.
Korean investors’ most favored stock is Xiaomi Corp. as they are holding $280.6 million worth of the Chinese electronics company shares as of Sept. 4.
The runner-up is Tencent Holdings Ltd. with $256.6 million, followed by Alibaba Group Holding Ltd. with $181.3 million, BYD Co. with $162.0 million and Semiconductor Manufacturing International Corp. (SMIC) with $120.1 million.
They have also delivered solid returns this year.
According to NH Investment & Securities, the average purchase price for SMIC shares in January was HK$34.90 ($4.48), giving investors a gain of about 65.6% year-to-date. Tencent is up 60.3%, Xiaomi 52.4% and Alibaba 51.8%, while BYD has also performed strongly with a 33.6% return.
“Given weakening fundamentals and the lack of strong government stimulus, the appeal of mainland China-listed equities has largely faded,” said Jeon Jong-kyu, an analyst at Samsung Securities Co.
“From an investment standpoint, it makes more sense to increase exposure to Hong Kong-listed tech stocks, where earnings momentum and valuations look more attractive.”
Write to Cho Ara at rrang123@hankyung.com
Sookyung Seo edited this article.
