Hong Kong stocks have ranked among the top in global major indices since 2024, and domestic public mutual funds with significant holdings have also performed exceptionally well. Hong Kong-themed funds have seen a positive return rate of 86.73% this year, with 72.51% yielding over 10%, outperforming equity funds across the entire market.

In September, the Hong Kong stock market experienced a significant rebound. Despite some adjustments following the end of the National Day holiday, as of October 11th, the Hang Seng Index and the Hang Seng Tech Index have still risen by 18.14% and 33.01% respectively since the beginning of September. This brings their gains for 2024 to 24.66% and 25.82%, placing them at the forefront among global major stock indices.

The layout of public mutual funds is also entering a harvest season. In the first half of 2024, the weight of Hong Kong stocks in public mutual funds' equity assets reached the highest level since 2021. In terms of returns, as of October 11th, 86.73% of Hong Kong-themed funds have seen positive returns since the beginning of 2024, with 72.51% yielding over 10%. During the same period, 64.30% of equity funds across the entire market have seen positive returns, with 23.99% yielding over 10%.

A series of domestic policy combinations and the Federal Reserve's easing cycle are considered important factors triggering the extreme rebound in the Hong Kong stock market. The freedom and valuation advantages of the Hong Kong stock market have won special favor from global capital during this period. Especially in terms of valuation, even after the rebound on October 11th, the Hang Seng Index's PE (TTM) was only 10.29 times, half the price of the Nikkei 225 (22.13 times).

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Looking at the public mutual fund holdings data, in the first half of the year, the public mutual funds significantly increased their allocation in industries such as oil and natural gas, public utilities, banking, telecommunications, and industrial transportation (classified by the Hong Kong Stock Exchange's secondary industry classification, the same below).

Thematic funds lead in performance

According to the data from Eastmoney Choice, as of October 11th, there are 235 Hong Kong-themed funds (names containing "Hong Kong", "Hong Kong", or "Hang Seng", only counting the main code), with a total scale of 171.3 billion yuan. Among them, there are 211 funds that have been established for more than one year.

Among the aforementioned 211 funds, 183 have seen positive returns since 2024, accounting for 86.73%, and 153 have seen returns over 10%, accounting for 72.51%. Overall, this is better than the performance of equity funds.

During the same period, there were 6,243 equity funds established for more than one year, with 4,014 seeing positive returns since the beginning of 2024, accounting for 64.30%, and 1,498 yielding over 10%, accounting for 23.99%.

Among the Hong Kong-themed funds, the top 20 performing products include 16 ETFs, such as the Hong Kong Securities ETF, the Hong Kong Stock Connect Financial ETF, the Hong Kong Non-Bank ETF, and the Hang Seng China Enterprises ETF, with returns since 2024 of 44.45%, 39.23%, 37.45%, and 34.66%, respectively.In actively managed funds, Huatai-PineBridge Hong Kong Stock Connect Quantitative, HSBC Jinxin Hong Kong Stock Connect Dual Core, Harvest Hong Kong Stock Connect Advantage, and FuGuo Hong Kong Stock Connect Quantitative Selection have been among the top performers during the same period, with returns of 32.21%, 32.17%, 30.17%, and 30.08%, respectively. As of the end of the first half of the year, the market value of Hong Kong stocks accounted for 91.61%, 90.04%, 82.54%, and 92.21% of their net asset values of the funds.

Out of 127 actively managed Hong Kong-themed funds, only 35 had a Hong Kong stock allocation weight of less than 50% at the end of the first half of the year, accounting for 27.56%, a decrease of 4.72 percentage points compared to the beginning of the year.

Data also shows that among the aforementioned 127 funds, 80 had increased their Hong Kong stock allocation weight compared to the beginning of the year, accounting for 62.99%. Among them, the most significant increase in allocation was observed in the three funds under Qianhai Open Source, namely Qianhai Open Source Shanghai-Hong Kong-Shenzhen Momentum Industry, Qianhai Open Source Shanghai-Hong Kong-Shenzhen Innovative Growth, and Qianhai Open Source Shanghai-Hong Kong-Shenzhen Longxin, with Hong Kong stock allocation weights at the end of the first half of the year being 84.57%, 68.07%, and 46.44%, respectively, increasing by 66.39, 63.28, and 46.10 percentage points compared to the beginning of the year.

Active equity funds that are not Hong Kong-themed are also increasing their allocation to Hong Kong stocks overall.

According to the data from Eastmoney Choice, out of 4,969 active equity funds, 1,992 had allocated to Hong Kong stocks at the end of the first half of the year, accounting for 40.09%, an increase of 3.60 percentage points compared to the beginning of the year. At the end of the first half of the year, 1,512 funds had increased their Hong Kong stock allocation weight compared to the beginning of the year, accounting for 75.90%.

Among them, the top three in terms of increased allocation were China Merchants Advantage Enterprise, Huitianfu Industry Upgrade, and ICBC Yue Enjoy Mixed, with Hong Kong stock allocation weights at the end of the first half of the year being 45.28%, 44.40%, and 43.00%, respectively, while at the beginning of the year they were 0%, 0.52%, and 0%, respectively.

In terms of holding market value, the total market value of Hong Kong stock targets held by public funds at the end of the first half of the year was 554.6 billion yuan, an increase of 8.47% compared to the beginning of the year. Compared with the same period increases of the Hang Seng Index and Hang Seng Technology Index (3.94% and -5.57%, respectively), the increase exceeded by 4.53 and 14.04 percentage points, respectively.

At the same time, among the publicly held stock assets (with a total holding market value of 5.72 trillion yuan), the weight of Hong Kong stocks reached 9.70%, the highest level since the second half of 2021.

At the end of the first half of 2021, after the weight of Hong Kong stocks in the publicly held stock assets reached a historical high of 10.51%, there was a certain degree of decline, even falling to 7.08% at the end of 2021. Except for a brief breakthrough of 9.00% in the second half of 2022, the weight has been around 8.80% in the other semi-annual periods.

Increased allocation in the top five industriesIn terms of specific holdings, the top three major positions, ZTO Express, COSCO Shipping Energy Transportation, and SITC International Holdings, have all been increased. The proportion of public fund holdings has risen by 3.88%, 1.33%, and 0.73% respectively compared to the beginning of the year.

Returning to the fundamentals, among other major industries, the professional retail industry, where Meituan, the second-largest industry in the Hong Kong stock market, is located, has seen its underweight position rise from 2.48% at the beginning of the year to 1.56%. The software service industry, where Tencent Holdings, the third-largest industry, is located, has seen its overweight position decrease from 7.43% at the beginning of the year to 5.43%. The real estate industry, where Cheung Kong Property Holdings, the fifth-largest industry, is located, has seen its underweight position rise from 4.20% at the beginning of the year to 3.17%. The insurance industry, where China Property & Casualty Insurance, the sixth-largest industry, is located, has seen its underweight position rise from 3.91% at the beginning of the year to 3.29%.

As for future investment opportunities in the Hong Kong stock market, a report published by Bank of Communications International stated that despite the significant fluctuations in the Hong Kong stock market after the holiday, it is expected that there is still room for upward movement driven by the combined resonance of domestic and international macro environments. However, it will then face high volatility and high differentiation, and it is highly unlikely to repeat the straight-line rise seen at the end of September. "In the future, while strategically being bullish on Hong Kong stocks, it is also necessary to refocus on the fundamentals of the industry, pay attention to industry tactics, and select investment targets supported by fundamental improvements."