"Now Is a Buying Opportunity: Retail Investors Buying Hong Kong Stocks"

18% Drop Over 3 Months... Larger Decline Than KOSPI and Shanghai Indices
ETF Investing in Hong Kong H Index Sees Net Purchase of 166.6 Billion KRW in One Month

[Asia Economy Reporter Minji Lee] As Hong Kong's representative stock market returns to 2016 levels due to China's power shortage and government regulations, the number of domestic investors engaging in bottom-fishing has significantly increased.

On the 8th, according to the securities information system SaveRo, domestic investors have net purchased approximately 166.6 billion KRW worth of the Hang Seng China Enterprises Index ETF (Exchange-Traded Fund) in overseas stock markets over the past month (September 7 to October 7). This ETF's returns are linked to the performance of the Hong Kong H-Share Index (HSCEI), one of Hong Kong's representative indices. The total purchase amount was 168.8 billion KRW, and the sales settlement amount was 192.53 million KRW, making it the second most purchased overseas stock by domestic investors.

Looking at the recent trend of the Hong Kong H-Share Index, it has shown a steep decline. From early July to the 7th of this month, the index dropped about 18%, from 10,633.39 to 8,713.05 over approximately three months. Monthly, it fell 13.41% in July, 0.54% in August, and 4.98% in September. During this period, it declined more than other major Asian stock markets such as the KOSPI (-10%) and Nikkei 225 (-4%), and even more than the Shanghai Composite Index (-0.64%, data up to the 30th of last month due to National Day holiday closure). The sharp decline is attributed to regulatory risks imposed by the Chinese government, which triggered a crisis for big tech and real estate companies, followed by energy companies experiencing sluggish stock performance due to power shortages disrupting factory operations. In particular, the default risk of the Chinese real estate developer Evergrande (恒大) Group appears to have further dragged down the index. Consequently, domestic investors who had mainly shopped for stocks listed on the U.S. stock market are now jumping into Chinese company investments, aiming for bottom-fishing opportunities.

Additionally, among the stocks most purchased by individual investors in the Hong Kong stock market over the past month, big tech-related stocks that saw significant price drops due to regulatory risks ranked high. The ‘GLOBAL X CHINA CLOUD COMPUTING ETF,’ composed of Chinese semiconductor companies listed on both the Chinese mainland and Hong Kong stock markets, was accumulated with about 5.1 billion KRW, and another ‘GLOBAL X CHINA CLOUD COMPUTING ETF,’ focused on Chinese cloud-related companies, was purchased for about 4.8 billion KRW. Other top purchases included Alibaba (4 billion KRW), Tongwei Group (2.5 billion KRW), JD.com (2.2 billion KRW), and Evergrande New Energy Vehicle Group (1.7 billion KRW).

In the securities industry, it is expected that the Hong Kong stock market will find it difficult to fall to the 8,500 level, but the Evergrande crisis is suppressing the index, making a strong rebound in the fourth quarter unlikely. Dongjun Shin, head of the KB Securities Research Center, advised, “Assuming the Chinese government eases platform regulations and Evergrande Group undergoes restructuring, there is no possibility of further significant declines in the Hong Kong stock market. However, concerns over the repayment of Evergrande Group’s dollar bonds may arise, which could worsen foreign investor sentiment and increase volatility compared to the mainland stock market, so caution is necessary.”

This content was produced with the assistance of AI translation services.