Investors rush for Shanghai shares
Print Edition
INVESTORS snapped up Shanghai stocks yesterday on the debut of an exchange link that allows Hong Kong and Shanghai investors to trade shares on each other’s bourses, a ground-breaking step in opening up the US$4.2 trillion stock market.
Northbound trade — investors with Hong Kong accounts buying mainland shares — far outstripped trade from mainland investors in the opposite direction, with the daily limit for Shanghai stocks exhausted after sales worth 13 billion yuan (US$2.12 billion) by 1:57pm.
On the other hand, Chinese mainland investors used just around 1.7 billion yuan of the 10.5 billion yuan daily quota they have to invest in the Hong Kong market.
Northbound investors can trade in 568 companies listed in Shanghai, while the southbound have access to 268 Hong Kong-listed shares.
The enthusiasm met market expectations. A Bloomberg News survey conducted last week showed some 81 percent of brokers predicting that the quota for Shanghai shares would be used up on the first day.
The benchmark stock indexes in both exchanges opened about 1 percent higher yesterday than Friday’s close but then gave up the gains as the Shanghai Composite Index dipped 0.2 percent and the Hang Seng Index ended up 1.21 percent lower.
Analysts said the market was under pressure due to profit taking, especially when the Shanghai index touched a three-year-high of 2,508 points before the noon break.
The Shanghai index has risen 17 percent since the beginning of the year, helped by expectations the exchange link will bring in extra capital.
“Investors today were still cautious when the market opened high after an array of weak economic data released last week,” said Dong Wangfei, an analyst with Western Securities. “But the inflow of money to Shanghai from the exchange link has driven up small cap shares. That could help improve market sentiment.”
Economists say the debut of the Shanghai-Hong Kong exchange link will lead to further opening up of the domestic capital market.
“The mutual market access is an important step in opening up China’s capital markets but is far from being the end point,” said Chen Li, chief China equity strategist at UBS Securities. “Some important index companies, such as MSCI, will again discuss next year whether to include A-shares in their international indexes.”
Inclusion of domestic shares into an international stock index should arouse awareness of major international publicly-offered funds and potentially attract more investment, Chen added.
Last Friday, the Ministry of Finance announced that it will temporarily exempt taxes on profits made from the Shanghai-Hong Kong exchange link, removing a potential stumbling block for global investors eager to buy Chinese stocks directly.
The Shanghai-Hong Kong connect will allow 300 billion yuan of investment in the mainland market from Hong Kong, while mainland investment in Hong Kong stocks will be limited to 250 billion yuan.
Analysts expect the quota to be lifted once the mutual trade proves smooth and active.
China currently operates several cross-border investment schemes to which investment institutions must apply for a license and quota before they are allowed to participate.
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