China's Asset Inventory in 2023: The CSI 50 Shines Alone, Hong Kong Stocks New Oriental and Ideal Lead the Blue Chips

On the last trading day of 2023, both A-shares and Hong Kong stocks closed in the red, according to Wallstreetcn.

Looking at the overall trend for the year, both A-shares and Hong Kong stocks experienced significant volatility. Most of the major A-share indexes closed lower, while the CSI 50 Index bucked the trend and rose sharply. The Hang Seng Index fell by double digits for the year. Despite the low market sentiment, there were still over 100 stocks that doubled in value, with some achieving annual gains of over 300%.

In the foreign exchange market, the widening of the interest rate differential between China and the US and pressure on the renminbi led to a strong rally at the end of the year, following the peak of the US dollar and US bonds. In the bond market, despite the challenges in the real estate sector and macro constraints, the bond market still experienced a "shock bull" trend, and many institutions expect the bond bull market to continue next year.

AH shares faced headwinds in 2023 due to accumulated risk sentiment and the global macro environment, causing both the A-share and Hong Kong stock markets to enter a volatile phase after a high and then a retreat in the first half of the year.

The overall performance of the market was poor, with the Shanghai Composite Index falling by about 3.7% for the year, closing below 3000 points. The Shenzhen Component Index fell by about 13.5%, closing at 9524.69 points. The ChiNext Index, which is mainly composed of growth stocks, fell by nearly 19.4%, ranking first in terms of decline. The Sci-Tech 50 Index also fell by 11.24% for the year, while the CSI 50 Index stood out with a nearly 15% increase.

The total turnover of the Shanghai and Shenzhen stock markets for the year reached 211.6 trillion yuan, a YoY decrease of 5.48%, marking three consecutive years of decline in total turnover. As for northbound capital, although there was a continuous outflow starting from September, it ultimately remained in a net buying position for the year, with a cumulative net purchase of 43.7 billion yuan, a decrease of 46.3 billion yuan compared to the previous year. This marked the 10th consecutive year of A-share accumulation since the launch of the Stock Connect program.

The Hang Seng Index has fallen for four consecutive years. In terms of major indexes, the Hang Seng Index and the Hang Seng China Enterprises Index both fell by about 14%, while the Hang Seng Tech Index fell by nearly 9%. Tencent, the largest weighted stock, fell by nearly 7%.

The biggest gainer in the A-share market soared by 573% to claim the top spot, according to data from Wind. Excluding newly listed stocks in 2023, there were over 2,700 stocks in the A-share market that saw gains for the full year, with 160 stocks achieving a cumulative increase of over 100%.

The top ten best-performing stocks in the A-share market continued to shine, with gains exceeding 310% for all of them. The industries and themes represented by these stocks were relatively diverse, including the Beijing Stock Exchange, AI computing power, optical communication, and mergers and acquisitions.

Taking the top spot on the list of the top ten best-performing stocks in the A-share market for 2023 (listed for more than one year) is Beijing Stock Exchange Kehua Materials, with a staggering increase of 573%. Following closely behind is LianTe Technology, which had the highest increase in the first half of the year and achieved a full-year gain of 400%. Shenglong Shares, on the other hand, secured the third spot with a 386.87% increase, driven by the "dragon head" concept and a strong 14-day consecutive trading limit after the National Day holiday. From an industry perspective, both Kaihua Materials and Huami New Materials were driven by the year-end market trends of the Beijing Stock Exchange. The former was driven by the concept of high-bandwidth memory (HBM), while the latter was driven by the concept of plastic replacing steel.

Kaihua Materials was listed on the Beijing Stock Exchange on December 22, 2022, with an IPO price of 4 yuan per share. Since November, the stock price of Kaihua Materials has skyrocketed by over 500%, leading the way among the 6 GMC concept stocks. It has set a record of 5 consecutive limit-up days in 6 days, becoming a rising star in the market.

The so-called GMC concept refers to granular epoxy encapsulant, which has been hyped up because HBM is considered the "most suitable memory chip for AI training and inference". Therefore, HBM will drive the growth of domestic TSV and wafer-level packaging demand, and it also puts higher requirements on packaging height and heat dissipation performance, with 3D packaging key raw materials becoming the core.

Liantek Technology ranked first on the main board with a 397.9% increase. It focuses on the research, development, production, and sales of optical communication transceiver modules. According to the announcement, the company is one of the few domestic manufacturers with the capability of R&D design and mass production of 100G/200G/400G/800G high-speed optical devices. The quality consistency and stability of its products have been recognized by top domestic and foreign customers.

Shenglong Shares benefited from the year-end market trends of "dragon stocks" and achieved a full-year increase of 385.55%. It is mainly engaged in the research, development, production, and sales of automotive powertrain components. The company announced that it supplies electronic oil pumps and other products to companies such as Qingshan Industry and Chongqing Xiaokang, and has obtained project designations. However, the revenue from supplying oil pumps and other products to Qingshan Industry is relatively small.

Jierong Technology, as a supplier to Huawei, experienced a super trend in September with a 21-day consecutive limit-up of 16 times, driven by the popularity of Huawei Mate 60. Its stock price rose from 9.02 yuan to 52.36 yuan within a month, with a maximum increase of 567.86% this year. The company's main business is precision structural components for consumer electronics. Source: wind

Hongbo Shares also firmly grasps computing power and chips, claiming to have established a unique and in-depth cooperation relationship with the global leader in AI chips, NVIDIA. The stock price started at 6.8 yuan at the beginning of the year and rose to a high of 45.29 yuan, with the largest increase of 593.57% in the year, setting 33 consecutive daily limit increases.

Source: wind

In addition to the top ten bull stocks, the list of the top ten bear stocks of the year was also released today. In the list of decliners, the top ten stocks all fell by more than 60%. Apart from ST stocks, the stocks with the largest decline are mostly new energy star stocks that experienced significant increases in the previous years.

Yuneng Technology ranked fourth with a decline of 69.6%, and it is also the stock with the largest decline among non-ST stocks. The company focuses on the field of photovoltaic power generation and its main products include micro inverters, intelligent control breakers, energy communication and monitoring analysis systems, etc. As a star stock last year, it soared after listing, and its total market value once exceeded 50 billion. However, due to the weakness in the photovoltaic and other new energy sectors, the company has been in a downward trend this year.

From the perspective of market style, stocks with heavy holdings by institutions and large market capitalization and high prosperity are under selling pressure, while funds flow to small market capitalization stocks for safety. Therefore, the small and medium-sized stock indexes represented by the CSI 1000 and CSI 500 have smaller declines, and the Wande Micro Index, which tracks small and micro-cap stocks, has a cumulative increase of nearly 50% in the year. In addition, the continuous introduction of policies in the active capital market has also increased the attractiveness of the Beijing Stock Exchange, with the Beijing 50 Index having a cumulative increase of about 15% in the year.

Source: wind Source: wind Multiple institutions have pointed out that the A-share market is currently approaching its historical low. Liu Zhiyong, an analyst at Wanhe Securities, pointed out that the ChiNext Index, Shenzhen Component Index, and Shanghai-Shenzhen 300 PE valuations are at the 0.00%, 9.40%, and 2.00% percentiles over the past five years, respectively. Their PB ratios are at the 7.74%, 3.73%, and 0.14% percentiles over the past five years, respectively, which are at historically low levels and have become relatively attractive in terms of valuation.

A Year in the Hong Kong Stock Market: Ideal and Xiaopeng Soar!

For the full year of 2023, the Hang Seng Index fell by 13.82%, the Hang Seng Tech Index fell by 8.83%, and the Hang Seng China Enterprises Index fell by 13.97%.

In terms of individual stock performance, since the beginning of the year, New Oriental Education has seen the most astonishing increase, surging by 93%, followed closely by Xpeng Motors with a 91% increase, leading the blue-chip stocks. Lenovo Group and PetroChina have also performed well, with annual increases of 78.02% and 56.93%, respectively.

Looking at the performance of different industries, most of the Hang Seng industry indices rose during the day, with the healthcare sector up 1.42%, the telecommunications sector up 1.05%, and the utilities sector up 0.9%. In terms of declines, the information technology sector fell by 0.25%, the conglomerates sector fell by 0.19%, and the raw materials sector fell by 0.04%.

Taking a look at the hot Hong Kong-listed Chinese concept stocks that investors are most concerned about, Ideal, Xiaopeng, Netease, and Baidu have seen the highest increases this year.

Among them, Xiaopeng, which experienced a 79% decline in 2022, has surged by 48% this year, Netease has risen by 25%, and Baidu has seen a slight increase of 4%. Meituan has fallen by over 53% this year, while JD.com and Bilibili have seen their stock prices nearly halved. Kuaishou has dropped by over 25%, Alibaba by over 11%, and Tencent and NIO by over 6%.

With the weakness in the Hong Kong stock market, the scale of share repurchases this year has reached a new high. As of December 25, 2023, the cumulative scale of share repurchases in the Hong Kong stock market has exceeded HKD 122.2 billion, surpassing last year's scale. Tencent Holdings and AIA Group have repurchased approximately HKD 46.424 billion and HKD 28.007 billion, respectively.

CITIC Securities pointed out that 2024 will be a year of gradual recovery for the Hong Kong stock market. Investor sentiment is improving, fundamentals are supportive, and the market bottom has been solidified. In addition, the resonance of inventory cycles between China and the United States will drive the continuous improvement of the fundamentals of the Hong Kong stock market.

Fed Shifts to Loose Monetary Policy, RMB Exchange Rate Rebounds at Year-end

Throughout the year, the USD-RMB exchange rate has experienced significant fluctuations. In the first three quarters, the RMB exchange rate, both onshore and offshore, was under pressure due to the strong US dollar.

However, in the fourth quarter, as the Federal Reserve's tightening policy approached its end and US bonds and the dollar peaked, the RMB exchange rate rebounded rapidly, breaking through several important levels. In the past two days, it has surged by over 600 points.

Looking at the whole year, the depreciation of the offshore and onshore RMB has narrowed to around 2%.

On the news front, on the evening of December 28th, the Monetary Policy Committee of the People's Bank of China held its fourth quarter meeting for 2023. The meeting concluded that efforts should be made to strengthen the implementation of existing monetary policies. Liquidity should be kept reasonably abundant, credit growth should be guided to be reasonable and balanced, and the scale of social financing and money supply should be matched with the expected targets for economic growth and price levels.

In a recent report, Mitsubishi UFJ Financial Group stated that considering the gradual and more balanced recovery of the Chinese economy in 2024, the narrowing of the interest rate differential between China and the US, and the market's positive sentiment towards the Chinese economy and assets, it holds a positive outlook for the RMB against the USD, and expects the RMB to appreciate by 5% in 2024.

Government Bond Yields Show M-shaped Trend in the Year

The main trading logic in the bond market in 2023 revolved around the process of economic recovery and policy expectations. As the improvement in economic fundamentals slowed down and expectations changed, the 10-year government bond yields showed an M-shaped trend throughout the year. Breaking it down, the bond market went through four stages:

Stage 1: From the beginning of the year to the end of February, there was strong anticipation of post-pandemic economic recovery and a surge in credit. Long-term bond yields rose and fluctuated at high levels. The 10-year government bond yield rose by 10 basis points and hovered around 2.9%.

Stage 2: From the end of February to mid-August, weak economic fundamentals combined with monetary easing measures such as interest rate cuts and reserve requirement ratio reductions, leading to a downward trend in long-term bond yields. The bond market declined from its peak of 2.93% to around 2.544% on August 21st, a decrease of nearly 40 basis points.

Stage 3: From mid to late August to the end of November, the "anti-aircraft turn" combined with fiscal stimulus and increased government bond supply resulted in a tight liquidity situation and rising interest rates. The 10-year government bond yield rose from around 2.54% to around 2.72%, an increase of about 20 basis points.

Stage 4: Since the end of November, the market has gradually digested the expectations of stable growth policies, with strong signals and expectations of loose monetary policy. The 10-year government bond yield has declined to around 2.57% at the end of the year.

According to a recent report released by China International Capital Corporation (CICC) on the bond market trend in 2024, it is expected that the bond market will remain bullish, with the possibility of interest rates either declining first and then rising, or declining first and then stabilizing. The current policy pace suggests that interest rates may continue to be in a downward cycle.