Bank of China International: Hong Kong Stock Connect demand strong and net inflows increase to 600 billion RMB this year, recommend closely watching TENCENT (00700) and others.

Bank of China International released a Hong Kong stock strategy report, stating that after the Fed's first interest rate cut in four years last Thursday, the Hang Seng Index rose by 5.1% last week, with an average daily turnover of HK$109 billion, an increase of 3.5% compared to the previous week. Mainland investors had a net inflow of RMB 5.4 billion in southbound trading last week, and the bank believes that there has been significant net inflows into Hong Kong stocks through the Stock Connect in recent years. As of September 20 this year, there had been a net inflow of RMB 448.2 billion through the Stock Connect, significantly higher than the net inflow of RMB 231.7 billion during the same period last year. The bank suggested that investors closely monitor some actively traded stocks through the Stock Connect. Looking ahead, it is expected that strong demand from mainland investors for Hong Kong stocks through the Stock Connect will continue in the next 6-12 months, mainly due to attractive valuations of Hong Kong stocks, some unique high-quality information technology stocks, and high dividend-yielding stocks. The bank forecasts that there will be a net inflow of RMB 600 billion in southbound trading between mainland China and Hong Kong in 2024, higher than the RMB 289.4 billion in 2023. In the long run, investment behavior data from the beginning of the year to date shows that southbound investors are focusing on industries such as banks, telecommunications, internet, automobile manufacturing, raw materials, and energy. In addition to high dividend-yielding stocks, the bank also recommends investors pay close attention to some actively traded southbound trading stocks, including TENCENT (00700), MEITUAN-W (03690), KUAISHOU-W (01024), and XIAOMI-W (01810).