On October 7th, the Hang Seng Index rose by 1.6% again, with a transaction volume of 296.8 billion Hong Kong dollars. From September 11th to now, over the course of nearly a month, the Hang Seng Index has surged by more than 6,000 points, and the "Hong Kong stock market era" has once again been initiated. How far can this round go?

On October 8th, after the resumption of participation by Southbound funds, whether the transaction volume of Hong Kong stocks can continue to break historical highs in coordination with the index is the key to how this round of market sentiment will continue. As the market "rises with the tide," investors should pay more attention to changes in the fundamentals of individual stocks and be wary of irrational speculation in some underperforming stocks.

Transaction fluctuations occur

Starting on October 8th, Southbound Hong Kong stock connect funds will once again participate in the investment of Hong Kong stocks, having a greater impact on the changes in transaction volumes of Hong Kong stocks. With the possibility of increasing profit-taking, the likelihood of significant market fluctuations increases. The pace of interest rate cuts by the Federal Reserve and other global central banks, as well as geopolitical situations, are also uncertain factors.

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During the mainland National Day holiday, the transaction volumes of Hong Kong stocks over four trading days showed some fluctuations. From October 2nd to October 7th, over five trading days, the daily transaction volume of Hong Kong stocks dropped from 43.4 billion Hong Kong dollars to 26.15 billion Hong Kong dollars on October 4th. This, to some extent, indicates that the pace of overseas funds buying Hong Kong stocks is gradually stabilizing. On September 30th, with the participation of mainland funds, the transaction volume of Hong Kong stocks reached a historical high of 50.58 billion Hong Kong dollars.

Some overseas investors who bought Hong Kong stocks during the National Day holiday may believe that because there will be a large area of stock price limits on October 8th in A-shares, investors who want to buy can only take over Hong Kong stocks that have been rising for a long time. However, in reality, the large number of stock price limits in A-shares may gradually open on the 9th and 10th, and it is not easy to predict the strength of mainland funds taking over Hong Kong stocks.

As the Hang Seng Index rises with the tide, some investors may accumulate a lot of floating profits, and there may be more cashing out or portfolio adjustments. After mainland funds re-enter the market on October 8th, the game between bulls and bears will become more intense, and the market fluctuation range will increase. In this regard, investors should be prepared for risk management.

Looking back at the past three "Hong Kong stock market era" market sentiments in history, the market can continue for a period of time. The similarity is the upsurge of investor account openings and "buying directly without asking the price," and looking forward to mainland funds eventually taking over on a large scale. Subsequently, the market sentiment turned, and the index highs all appeared a few weeks after the transaction highs. How the actual strength of mainland funds taking over will determine the future trend of Hong Kong stocks. If it is not as expected, Hong Kong stocks may also be significantly affected.

The past three "Hong Kong stock market era" market sentiments were: in August 2007, the "Hong Kong stock direct train" was opened, and on August 17th, the Hang Seng Index rose from 19,386 points to 31,958 points on October 30th, with a transaction volume close to 21 billion Hong Kong dollars on October 3rd; in April 2015, public funds could buy Hong Kong stocks through the Hong Kong stock connect, and the Hang Seng Index rose from 24,486 points on March 27th to 28,588 points on April 27th, with a transaction volume of 26.36 billion Hong Kong dollars on April 13th; the most recent one occurred less than four years ago: at the beginning of 2021, public funds bought a large amount of Hong Kong stocks, and the Hang Seng Index rose from 26,119 points on December 22, 2020, to 31,183 points on February 17, 2021, with a transaction volume exceeding 30 billion Hong Kong dollars on January 19, 2021.

Return to fundamental analysisIn terms of specific operations, investors should also be wary of the "luring" of some poorly performing individual stocks in the Hong Kong stock market. As the third-quarter reports are gradually disclosed, it is even more important to return to fundamental analysis.

Starting on October 2nd, some individual stocks with poor basic factors and low stock prices have seen a doubling in a single day, and some "penny stocks" have even increased several times in a day. On October 4th, the Hang Seng Index rose by 2.82%, and on October 7th, it rose by 1.6%. There have also been similar cases of irrational speculation.

In addition, the Hong Kong stock market has once again ushered in a surge in retail investor account openings similar to that of April 2015, and Hong Kong brokers have also seen a queue for account openings. Unlike that year, when the surge in A-share account openings had already arrived in December 2014, the surge in Hong Kong stock and A-share account openings was not completely synchronized; this time, the surge in account openings for Hong Kong stocks and A-shares is almost synchronized.

Some retail investors like to speculate on highly volatile small-cap stocks in Hong Kong. Investors should remain rational and focus more on the changes in the fundamentals of investment targets after the Hang Seng Index has risen by more than 6,000 points. They should also be alert to the "luring" of some individual stocks with poor fundamentals.

Looking back at the three "Hong Kong stock market era" trends mentioned above, many investors have bought some poorly performing Hong Kong stocks because they were "cheap" or "chasing highs," falling into the trap of "cheaper" but not knowing when it is the "cheapest," causing significant losses at one time. On the other hand, some listed companies have also repeatedly harvested investors' wealth through various financing methods.

Since mid-September, after the Hong Kong stock market has risen sharply by more than 6,000 points, the valuation of Hong Kong stocks is not as cheap as before. Investors who want to continue participating in the Hong Kong stock market in the future should return to fundamental analysis and carefully select companies with strong fundamentals to make their investment returns more经得起考验 over a long period. As the index rises, the third-quarter reports of listed companies will be disclosed one after another, and the annual performance pre-disclosure will also gradually lead the trend of the Hong Kong stock market.