CICC: HK Stocks Lead A-Shares in Bottoming Out, Dividends and Buybacks Are Key Supports
nashnova research
CICC's latest report notes the Hang Seng Tech Index has fallen continuously from its October 2025 peak, breaking below the "924" rally starting point, while the A-share STAR 50 and ChiNext have both pulled back nearly 45% from their late-June highs. This means → both markets are deep into a correction cycle, but they won't bottom at the same time — Hong Kong will most likely lead again.
Why does Hong Kong always peak and bottom before A-shares?
The same pattern has repeated across two cycles: Hong Kong leads A-shares to the top by roughly eight to nine months. The Hang Seng Tech peaked in February 2021; the ChiNext didn't top until November that year. This cycle followed the same script.
This means → Hong Kong reflects shifts in the household credit impulse — the pace at which households borrow — earlier, while A-shares ride high-growth sectors longer.
In plain terms = as an offshore market, Hong Kong competes globally for capital. Once overseas investors sense Chinese earnings momentum is fading, they cut exposure first — so Hong Kong's price signal arrives before A-shares'.
How did Hong Kong bottom last time? Not on fundamentals
Hong Kong bottomed in late January 2024, roughly eight months before the "924" rally. But CICC stresses that earnings per share for the Hang Seng Index and Hang Seng Tech were still being revised *down* at that point — fundamentals had not stabilized.
This means → that bottom was driven by investors seeking stable dividends amid uncertain growth — what CICC calls a "dividend floor."
High-dividend stocks account for nearly 40% of the Hong Kong market by weight. Dividend yields top those in A-shares, and mainland insurers buying Hong Kong dividends via Stock Connect pay no dividend tax — giving the dividend strategy an extra edge offshore.
What role did Big Tech buybacks play?
Alibaba added a $25 billion buyback authorization in February 2024; Tencent announced in March that full-year buybacks would reach at least HK$100 billion. Buybacks function as another form of shareholder return, much like dividends.
From February 2024 to the "924" rally, Tencent rose a cumulative 39.9%. The Hang Seng Tech's buyback yield — buyback spending divided by market cap — reached as high as 2.4%; Tencent's own buyback yield climbed from 1.8% in 2023 to 2.9%.
In plain terms = before fundamentals improved, hard cash from buybacks plus high dividends built a "price floor" that gave capital a reason to stay.
What drives the "three-to-four-year" cycle?
CICC identifies three major bottoms — January 2016, January 2019, January 2024 — spaced roughly three to five years apart. Three major tops — November 2017, February 2021, October 2025 — follow a similar cadence.
This reflects a deeper mechanism: the credit cycle sets the medium-term trend; capital flows and trading behavior set the turning points.
The household credit impulse — the rate of change in credit growth — peaks roughly in sync with, or up to 12 months ahead of, the Hang Seng Tech peak. After credit turns down, inventories, capacity, and other business-cycle indicators typically keep falling for months, and policy responses also take time to transmit.
Can the market repeat the 2024 "dividend floor"?
CICC notes the household credit impulse has been declining since late last year. By March it had fallen below the "924" starting level, dragging on sectors with heavy domestic-demand exposure.
Over 70% of the Hang Seng Tech's weighting sits in internet, EVs, e-commerce, and consumer electronics — broad consumer plays — making its underperformance especially stark.
This means → whether the market can replicate the 2024 "dividend floor" in the near term depends on whether high-dividend, high-buyback names can again form a support level. A more durable, fundamentals-driven bottom still requires a material stabilization in the household credit cycle — and that condition has not yet appeared.
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