Recently, the medical, technology, consumer, dividend, and financial sectors in the Hong Kong stock market have risen, and the "five golden flowers" continue to bloom. It is worth noting that the Hang Seng Shanghai Shenzhen Hong Kong Stock Connect AH Stock Premium Index recently hit a nearly five-year low, reflecting a significant narrowing of the discount between H-shares and A-shares. Why have the above sectors performed well recently? What is the condition of the "Five Golden Flowers" in the Hong Kong stock market? Is it a return of value or a game of funds behind it? Will the future market have sustainability? Around these issues, the reporter interviewed multiple institutions. According to Wind data, as of June 17th, the cumulative net purchase amount of Hong Kong stocks by Southbound funds this year has exceeded HKD 690 billion, exceeding 85% of the net purchase scale of Southbound funds for the whole year of 2024. Since the beginning of this year, the Hang Seng Index and Hang Seng Technology Index have risen higher than the three major A-share indices. From a segmented perspective, the Hong Kong stock market's medical, technology, consumer, dividend, and financial sectors have seen the highest growth, forming a "five golden flowers" pattern. From the perspective of ETF products, Wind data shows that as of June 17th, the top 15 ETFs with the highest market growth this year are all Hong Kong pharmaceutical themed products, with a range increase of over 40%; Gold themed ETFs rank in the second tier of the rising list; The third echelon is a number of Hong Kong Stock Connect technology ETFs and Hong Kong Stock Connect Internet ETFs, with the range increase of more than 25%; Both Hong Kong stock financial ETFs and Hong Kong stock non bank financial ETFs have risen by over 20% and recently hit a new historical high. Hong Kong stock ETFs have risen by over 15% and are also near historical highs; Multiple Hong Kong stock consumption themed ETFs have risen by around 20%; There are also multiple Hong Kong stock dividend themed ETFs with gains of over 15%. It is worth mentioning that with a large number of high-quality companies going public in Hong Kong for IPOs, new consumer goods, artificial intelligence (AI), innovative drugs and other companies are being sought after by funds in Hong Kong, and the performance of the Hong Kong Stock Exchange has greatly improved. The financial data for the first quarter of this year has performed well. As an important heavyweight stock in the Hong Kong stock market, as of June 17th, the Hong Kong Stock Exchange has risen by over 40% this year, driving the rise of products such as financial ETFs and non bank financial ETFs in the Hong Kong stock market. In active public fund products, the inclusion of "Hong Kong" volume becomes the determining factor in performance. Since the beginning of this year, most of the funds with outstanding performance have heavily invested in innovative drugs in Hong Kong stocks. According to Wind data, as of June 17th, the return rate of Huitianfu Hong Kong Advantage Selection A/C managed by Zhang Wei this year is close to 99%. As of the end of the first quarter, almost all of the heavy holdings of the fund were innovative drug varieties in Hong Kong stocks; The return rate of Yongying Pharmaceutical Innovation Intelligent Selection A/C and Bank of China Hong Kong Stock Connect Pharmaceutical A/C since the beginning of this year is around 70%. Zhang Wei stated in the first quarter report of the fund that China's innovative drugs going global is the most important mainline for the pharmaceutical industry in the coming years. The pharmaceutical industry will continue to demonstrate good resistance to cycles and technological attributes in the next 2 to 3 years. The fund will adhere to investment priorities such as innovative drugs and excellent equipment and consumables leaders with low localization rates and high barriers to entry. At the same time, with the continuous rise of Bubble Mart and Old Shop Gold, funds heavily invested in new consumer products in Hong Kong stocks have also performed well. During the above period, the return rate of holding A/C in Guangfa Growth Navigator managed by Wu Yuanyi exceeded 60% in one year, while the return rates of A/C in Xinao Youxiang Life and Southern Hong Kong Growth both exceeded 40%. Why are the five major sectors performing well this year, despite significant differences in their upward momentum? What is the condition of the "Five Golden Flowers" in Hong Kong stocks? One important prerequisite is that the Hong Kong stock market continues to be favored by funds. According to a research report by China International Capital Corporation, the macroeconomic and market environment with structural highlights in China is more conducive to the Hong Kong stock market. Whether it is dividend assets that provide stable returns or new consumption, AI technology, and innovative drugs that serve as structural mainlines, Hong Kong stock related products have relatively more advantages, which is also an important reason for the outstanding performance of the Hong Kong stock market this year. China International Capital Corporation (CICC) estimates that the relatively certain southbound incremental funds for the year will be between HKD 200 billion and HKD 300 billion, and the cumulative net purchase scale for the whole year may exceed HKD 1 trillion. If analyzed carefully, there are significant differences in the reasons leading to the rise of the 'Five Golden Flowers'. ”Zheng Zhonghua, Assistant General Manager of Green Fund, Director of Equity Investment, and Fund Manager, told China Securities Journal reporters that "it can be roughly divided into three different types." The first type is Davis Double Click, which is mainly driven by performance and includes the technology and consumer sectors. In terms of technology, the global AI industry explosion has driven the growth of AI infrastructure (such as computing power) and downstream application performance, driving up stock prices. In terms of consumption, the new consumer industries related to Yueji economy (fashion play, cosmetics) and precious metals have risen significantly, which is in line with the changes in China's population structure and living habits and the enhancement of cultural self-confidence. The second category is Davis Double Click, driven by valuation, mainly referring to the healthcare sector. The main driving force behind the rise of the Hong Kong pharmaceutical sector, represented by innovative drugs, is policy optimization and low valuation. After years of accumulation, domestic innovative pharmaceutical companies have gradually entered a period of achievement transformation, and stable performance prospects are the core determining factor for the long-term upward trend of stock prices in the pharmaceutical industry. The third category is the upward trend in stock prices brought about by valuation repair, mainly including dividend products and financial sectors. Most dividend products and financial stocks have not shown significant improvement in performance, and the rise in stock prices is mainly due to the valuation repair brought about by the "A-share mapping". Behind this is the selection of low wave and stable income products in the equity market by medium and long-term funds such as insurance funds. Dividend products and financial stocks have become the preferred investment choices for such funds due to their stable performance expectations and high dividend yields. It is worth noting that the influence of domestic capital on Hong Kong stocks has increased. The Hang Seng Shanghai Shenzhen Hong Kong Stock Connect AH Stock Premium Index hit a new low of 126.91 points on June 12, hitting a five-year low. Afterwards, the index slightly rebounded, but as of the close on June 18th, companies such as CATL, China Merchants Bank, and WuXi AppTec still showed a premium between H-shares and A-shares. Is the blooming of the "Five Golden Flowers" in Hong Kong stocks a return to value or a game of funds? Will the future market have sustainability? Although the AH premium has significantly narrowed, this phenomenon is more attributed to value regression rather than short-term capital games, and there is currently no significant risk of overheating in Hong Kong stocks. ”Zheng Zhonghua believes that the logic of the five major industries in Hong Kong stocks rising mentioned above still exists. Although the linear extrapolation of logic is not advisable, the upward trend of these industries can still be maintained. In the medium and long term, stock prices are the weighing machine of performance, and we are more optimistic about the Davis Double Click market with performance as the main driving force Wan Chengshui, founder and investment director of Hong Kong Global Value Chain Investment Co., Ltd. and Golden Wing Private Equity Fund Management (Zhuhai Hengqin) Co., Ltd., told China Securities Journal reporters: "Looking ahead to the future, technological innovation is the main source of investment value, and industries such as semiconductors (including chip design and processing), artificial intelligence (including computing power, basic models, intelligent driving, and robots) are industries that we have long been optimistic about. Among the 'Five Golden Flowers' of Hong Kong stocks, the highly certain one is the technology innovation theme represented by artificial intelligence. The A-share and Hong Kong stock markets are jointly showcasing the long-term investment value of China's equity assets. ”Wan Chengshui said, "In the past six months, although Hong Kong stocks have experienced structural market trends, their valuations are still relatively low in major global financial markets, which deserves continuous attention." A fund manager from a large public fund said, "In the long run, with the continuous optimization of the Shanghai Shenzhen Hong Kong Stock Connect mechanism and the convergence of capital market rules between mainland China and Hong Kong, the pricing efficiency of the two markets will gradually improve, and the price difference that has existed in AH stocks for a long time may further converge. Especially for high dividend, undervalued blue chip varieties, H-share prices may be closer to A-shares. ”The downward trend of the US dollar cycle under the reconstruction of monetary order has provided support for Hong Kong stocks. Hong Kong stocks are benefiting from factors such as the resilience of China's economic fundamentals, trends in the AI industry, low valuations, and a significant undervaluation of foreign investment, and a reassessment of their value may still be on the way. ”The research report released by China International Capital Corporation on June 17th stated that with the increasing influence of domestic capital on Hong Kong stocks, the correlation coefficient between A-shares and Hong Kong stocks continues to rise, and the premium of A-shares relative to H-shares is also at a low level in nearly five years. If the value of Hong Kong stocks continues to be revalued, there may be spillover effects on A-shares. (New Society)