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GLOBAL buyers snapped up Shanghai stocks yesterday at the debut of an exchange link that allows Hong Kong and Shanghai investors to trade shares on each other’s bourses, a major step toward opening the Chinese mainland’s capital markets.
The stock connect program gives foreign and mainland retail investors unprecedented access to the two exchanges, which some analysts said could eventually lead to the creation of the world’s third-largest stock exchange.
Shares in both Shanghai and Hong Kong opened around 1 percent higher but quickly gave up some gains, with Hong Kong markets falling into negative territory.
The volume of “northbound” trade — investors with Hong Kong accounts buying mainland shares — was far greater than trade from mainland investors in the opposite direction, with the daily buying quota for Shanghai stocks exhausted by mid-afternoon.
Investors were cautious of chasing up shares given the strong rally in the lead-up to the launch on expectations of an increase in fund flows from the program, said Zheng Weigang, senior trader at Shanghai Securities. “In the longer run, however, the connect will surely benefit both markets as China increasingly opens up to the outside world,” Zheng said.
Analysts had expected much of the initial cash flow to be northbound, with foreign investors on the Hong Kong stock exchange able to collectively buy up to a daily quota of 13 billion yuan (US$2.12 billion) in mainland stocks.
The expected fund inflow had helped push the SSE180 Index and the SSE380 Index — the two main Chinese destinations for foreign investment through the program — up more than 10 percent and 6.5 percent since late last month.
Southbound investment, capped by a daily quota of 10.5 billion yuan, may be less active.
By mid-afternoon, all of the 13 billion yuan daily northbound quota had been used, meaning no further buy orders would be accepted for the remainder of the day. Less than 15 percent of the 10.5 billion yuan southbound quota had been taken up. (SD-Agencies)
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