The current overall price-to-earnings ratio of Hong Kong stocks is around 8-10 times, with the historical low around 5-6. The average pb is around 0.9. Individual price-to-book ratios can be around 0.3-0.6, but the dividend rate can reach 6%-10, Hong Kong stocks have been undervalued for a long time. There are several reasons for this.
1. It is related to the composition of the stock.
In the Hong Kong market, finance and real estate account for half of the market, such as HSBC, AIA, China Construction Bank and other stocks. Such stocks themselves cannot obtain high valuations, causing the overall valuation of Hong Kong stocks to be lowered.
2. It is related to the source of investors.
Although the Hong Kong market is a global market, there are more than 60 companies from the mainland. However, it is relatively troublesome for mainland investors to enter the Hong Kong stock market to operate these stocks, and it is relatively niche. The investment threshold of Hong Kong stock brokerage companies often starts at 500,000, which directly drives out a large number of investors. Data show that the proportion of inland investors is only about 10%.
In addition, many investors who are accustomed to A-shares do not even know that they can enter the Hong Kong stock market through Internet brokers. Through Internet brokers, you can avoid the high threshold and buy high-quality Hong Kong stocks. (For questions about how to choose Internet brokers, please leave a message for a private chat and I will send you a copy of "The Most Comparative Comparison of Hong Kong Stock Brokers in History")
3. It is related to the liquidity of the stock market.
Hong Kong implements a registration system, which means that as long as a company is willing to go public and meets the listing conditions, it can basically go public. Regulatory authorities only check qualifications and do not judge the value of the stock itself. Especially after the reform of the issuance system, the pace of stock issuance in Hong Kong has accelerated significantly since the middle half of last year, and a large number of new stocks have been listed.
This results in an oversupply of stocks, which will inevitably lead to a decline in valuations. Although there are Shanghai-Hong Kong Stock Connect and overseas institutional investors investing in Hong Kong stocks, these funds usually prefer to make value investments and explore undervalued stocks. Compared with the financing needs of the Hong Kong market, they appear to be stretched thin.
4. It is related to market positioning.
Although Hong Kong stocks are an international market, European and American countries have their own exchanges. American investors are more willing to invest in stocks on the New York Stock Exchange and Nasdaq; Europeans invest in the London Stock Exchange; inland Invest in Shanghai Stock Exchange and Shenzhen Stock Exchange.
The Hong Kong Stock Exchange is more embarrassing. European and American countries will definitely choose markets they are familiar with. The New York Stock Exchange and Nasdaq are the first choices. The Hong Kong Stock Exchange is used as a backup and will only be used for value investments. , for example, Buffett’s purchase of PetroChina’s Hong Kong stocks is a typical cross-market arbitrage method.
In short, the undervaluation of Hong Kong stocks is not a recent phenomenon, it has been going on for many years.
So does Hong Kong stock have no investment value? Nothing to do?
Obviously not, the situation of Hong Kong stocks being undervalued is now gradually showing favorable factors! The first is the expansion of the interconnection mechanism. It is imperative to open up public funds to invest in Hong Kong stocks. In the future, more funds will go south to buy stocks in Hong Kong. It will create favorable conditions for improving the liquidity situation of Hong Kong stocks.
Secondly, the Hong Kong Stock Exchange actively pursues changes and takes the lead in institutional innovation. The system of different rights for the same shares has been established on the Hong Kong Stock Exchange, attracting a large number of new economy companies to log in to the Hong Kong market, and the valuations of such companies are usually not too low. Previously, Internet giants such as Tencent, Meituan, and Xiaomi were listed on the Hong Kong Stock Exchange. In the second half of this year, Alibaba is also likely to be listed in Hong Kong, which fully demonstrates the competitiveness of the Hong Kong Stock Exchange.
Finally, the Hong Kong Stock Exchange is a mature market with nearly a century of history and obvious advantages in market supervision and trading systems. These are also important reasons for attracting high-quality companies to go public. As various high-quality companies are listed, the composition of the Hong Kong Stock Exchange will gradually change, and valuations will also be revised upwards.