Money Today Expert Kim Jae-hyeon | 2023.12.16 06:25
[MT리포트]’ELS cruel history’, looking into the H index ①
Editor’s note | As the possibility of large-scale losses in the first half of next year looms large in ELS (equity-linked securities) with Hong Kong’s H Index as the underlying asset, investors are expressing their anger. Amid criticism that a significant proportion of total sales (an estimated 20 trillion won) were under-sold to those in their 60s, the products due to be discontinued in the first quarter of next year are alone totaling 4 trillion won. What on earth is Hong Kong’s H Index? Is there any possibility of an unexpected rebound next year?
As Hong Kong’s stock market continues to tumble, investors in equity-linked securities (ELS) products with the H Index (HSCEI) as the underlying asset are at risk of trillions in losses of hard-earned money early next year. If the H index fails to rebound, losses will be realized. Why did the H index fall so much? What is the probability that the H index will rebound in the first half of next year when ELS products sold are discontinued?
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Plunge H index, include P chips at the worst possible time
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ELS is a derivative product that guarantees the promised principal and rate of return if the price of underlying assets such as indices and stocks does not fall below a certain price (offer in) within maturity. Generally, ELS can be redeemed if the index is more than 60-70% at the time of issue at the time of redemption, which is three years maturity. However, it becomes a problem as the H-index, which was above the 12,000 mark in February 2021, has plunged to the point where it threatens to reach the 5,500 mark. According to data presented by the office of People Power Party Rep. Yoon Han-hong of the Financial Supervisory Service, the balance of ELS sales with the H index as the underlying asset at the end of August was 20.5 trillion won. Of these, bank sales equal 15.8 trillion won, and 8.3 trillion won, more than half of bank sales, will mature in the first half of next year.
The H Index refers to the Hang Seng China Enterprise Index (HSCEI), which consists of 50 Chinese companies listed on the Hong Kong Stock Exchange. The reference point for the H index is January 3, 2000, and the stock index on that day is 2000. The all-time high was 20,609.1 recorded on November 1, 2007.
This is not the first time the H-index has plunged. In mid-2015, the H index began to decline sharply from the 15,000 level, and fell to the 7,500 level in February 2016, entering the melted range, raising concerns about losses of scale big for ELS investors. Fortunately, the situation ended without any problems as the H index ended in February 2016 and rose for a long time to 12,000 in 2018. But this time seems different.
The conflict between the US and China and the Chinese economic slowdown are holding back the Hong Kong stock market, and the rebalancing of the H index that took place in 2018 is having a significant impact. Since 2018, the Hong Kong Hang Seng Index Company has included P chips (Chinese private companies listed in Hong Kong) in the H index, which previously only included H shares (Chinese state-owned enterprises listed in Hong Kong).
H shares are mainly large Chinese state-owned enterprises such as Construction Bank, Industrial and Commercial Bank of China, and China Mobile, while P Chips (private enterprises) include Chinese private IT companies such as Alibaba, Tencent, and Xiaomi. Kim Hyeong-do (47), former senior director at Value Partners, who has launched and managed funds related to the Chinese and Hong Kong stock markets in Korea and Hong Kong for over 10 years, said, “As the electorate of the H. changed the index, big tech stocks like Tencent were included at the top.” he did
Director Kim said that the H index before 2018 was “an index composed mainly of H stocks representing China’s old economy, and the proportion of financial stocks reached 70%, but in 2020, the proportion of H stocks decreased to 35% and the proportion of H stocks. P chips rose to 50%.” “I did that,” he explained. He added, “P-chips, including large tech stocks, were included at the worst possible timing (2018-2020), but after 2021, these companies plunged, exacerbating the fall in index H.”
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37% of H index constituents are IT stocks… Directly hit by Chinese government regulations
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The high proportion of IT in the H index is also a burden. At the end of November, the highest 1 to 5 H index shares were Tencent (8.65%), Construction Bank (7.47%), Alibaba (6.97%), China Mobile (5.94%), and Meituan (5.75%), three companies IT and financial company There are two places. Alibaba managed to hold the top spot for a long time, but fell to third place as its stock price continued to fall. On the 11th, Alibaba’s stock price fell to around 68 Hong Kong dollars, a drop of 78% from the peak of 309.4 Hong Kong dollars recorded in October 2020. With the stock price of the No. 1 stock plummeting like this, it cannot even the H index caught up.
Looking at the share of industries in the H index, IT was in first place with 36.9%, followed by finance (24.4%), consumer goods (13.8%), energy (7.6%), and communications (5.9%). Since the share of large financial stocks such as Construction Bank, Industrial and Commercial Bank of Korea, and Ping An Insurance is only 24.4%, it is difficult for the index to rise unless IT stocks such as Alibaba and Tencent rebound.
However, the profitability of major Chinese IT companies has declined since the Chinese government’s anti-monopoly regulations were significantly strengthened in early 2021, and shows no signs of a full-scale recovery. This means that it is too early to talk about a rebound of Chinese IT companies.
Additionally, as the Chinese government steps in to support Chinese real estate companies such as Biguiyuan (Country Garden) that are at risk of default, concerns are growing that real estate insolvency will spread to finance or that the profitability of the financial industry will is slowing down. down. there is
According to Chinese media such as China Securities News on the 10th, the money released by Chinese banks, including five state-owned banks, since November was in line with the government’s policy to support private real estate companies more than 30 billion yuan (5.4 trillion won) . As Chinese authorities cut mortgage loan interest rates of major state-owned banks as part of a plan to stimulate the real estate economy, the slowdown in the real estate market appears to be leading to worsening profits in the financial industry.
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What is the outlook for the H index next year?
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There is also analysis that the Hong Kong stock market, including the H Index, is now approaching the bottom. At the end of November, the price-to-earnings ratio (PER) in the H index was 8.69 times, which is less than a quarter of the record high of 36 times recorded in October 2007 and less than half of highest ever. 18 times recorded in March 2021. Although it will be difficult for the H-index to rebound immediately, predictions have been raised that next year’s H-index will show a ‘first low, then high’ pattern. Chinese investment bank (IB) CCB International said in ‘2024 Hong Kong Stock Market Investment Forecast: Taking a Chance for a Recovery’ published on the 4th, “If the Hang Seng Index falls below 19,781.41 at the end of this year, the Hong Kong stock Kong The market will fall for the first time in four consecutive years, “It is falling,” he said, adding, “It is approaching the low point in the medium to long term.”
CCB International predicted, “Next year, the Hong Kong stock market will move in a ‘W’ shape, showing a low, low, high pattern. The Hang Seng Index will move in the range of 16,500 to 20,500, and the H Index will moving in the range of 5,500 to 7,000.”
[저작권자 @머니투데이, 무단전재 및 재배포 금지]
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