On February 4th, mainland capital inflows recorded a net purchase of HK$13.373 billion in the Hong Kong stock market. Specifically, the Shanghai-Hong Kong Stock Connect saw net buying of HK$7.393 billion, while the Shenzhen-Hong Kong Stock Connect registered net purchases totaling HK$5.98 billion. The stocks that attracted the most substantial inflows from mainland investors were TENCENT (00700), BABA-W (09988), and the CSOP Hang Seng TECH ETF (03033). Conversely, the stocks experiencing the largest net outflows were Semiconductor Manufacturing International Corporation (00981) and Hua Hong Semiconductor (01347).
Mainland capital aggressively accumulated technology and internet stocks. TENCENT (00700), BABA-W (09988), Meituan-W (03690), and Kuaishou-W (01024) received net inflows of HK$2.231 billion, HK$1.171 billion, HK$404 million, and HK$220 million, respectively. This buying activity occurred amidst recent online rumors suggesting a potential tax increase on internet value-added services, such as in-game purchases and advertising. Morgan Stanley has expressed the view that the market is excessively worried about the possible negative implications of any changes to Value-Added Tax regulations.
The investment bank pointed out that there is currently no evidence indicating any imminent changes to the VAT rate for internet-related services, which includes virtual game items and online advertising and is currently set at 6%. Furthermore, Morgan Stanley believes China's artificial intelligence development trajectory will become much clearer by 2026, driven by both supply-side and demand-side factors.
XIAOMI-W (01810) attracted net purchases of HK$765 million. This follows a report from Bank of China International, which highlighted that XIAOMI's electric vehicle deliveries exceeded 39,000 units in January, outperforming its peers. This strong performance was primarily attributed to a backlog of orders for the YU7 model and the introduction of new financial promotional offers. The report also suggested that XIAOMI's ongoing investments and anticipated returns in areas like large AI models, robotics, and semiconductors are expected to support its current valuation.
In contrast, CHINA MOBILE (00941) faced net selling of HK$350 million. The pressure on its shares comes from expectations that China's three major telecommunications operators will see their net profits pressured by 2026 due to a potential VAT rate increase. Official announcements indicate that these carriers plan to continuously enhance operational efficiency, focus on high-quality development, and accelerate their transition into emerging sectors like artificial intelligence and cloud services to mitigate the impact of the tax adjustment.
Pop Mart (09992) received net inflows of HK$210 million. The catalyst for this interest was news that the company's founder and CEO, Wang Ning, announced during a CEO roundtable at the China-UK Business Forum that London has been designated as the location for its European headquarters. The company plans to open 27 new stores across Europe, including seven offline locations in the UK, such as flagship stores in Birmingham, Cardiff, and London's Oxford Street. This expansion is projected to create over 150 jobs in the UK.
Changfei Optical Fiber & Cable (06869) garnered net purchases of HK$154 million. Guotai Junan Securities noted that the optical fiber industry is experiencing a clear upward price trend, with hollow-core fiber presenting a new growth area. With loose fiber prices continuing to rise recently, and increased demand ahead of procurement cycles by telecom and mobile operators coupled with pre-holiday stockpiling, the brokerage anticipates prices will continue their ascent. It believes major domestic clients are likely to accept these price increases, providing confirmation for the sector's momentum amidst market fluctuations.
Junda Stock (02865) saw net buying of HK$103 million. According to reports from Cailian Press, industry sources indicated that Elon Musk's team has recently been conducting due diligence on China's photovoltaic supply chain, and some heterojunction equipment manufacturers have already secured orders. It was reported that in December last year, Junda announced a strategic cooperation framework agreement with Shangyi Photoelectric to collaborate on the research, development, and industrialization of flexible perovskite technology for space computing and energy applications.
Additionally, the CSOP Hang Seng TECH ETF (03033), CNOOC (00883), and XFX Group (02473) attracted net purchases of HK$1.122 billion, HK$227 million, and HK$139 million, respectively. On the other hand, Semiconductor Manufacturing International Corporation (00981) and Hua Hong Semiconductor (01347) were hit with net outflows of HK$706 million and HK$235 million.
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