THE flood of buy orders for Shanghai shares through the Hong Kong exchange link yesterday slowed to a trickle two days after the program’s debut.

    Net purchases of mainland equities by global investors totaled 1.1 billion yuan (US$180 million) at the midday break, down from 2.7 billion yuan at the same time Tuesday and 10.6 billion yuan Monday. Hong Kong stock buying slowed 66 percent from Tuesday to 117 million yuan.

    Fund managers say a general wariness toward mainland stocks — Shanghai’s stock market had been flagging for years until the plan was announced in April — and a high financial bar for investing into Hong Kong are among reasons why investors appear to have lost interest. The program allows wealthy individuals on the mainland to buy Hong Kong-traded stocks and gives international investors access to shares listed in Shanghai.

    One reason for the weak demand is that share prices had already surged in anticipation of the link, said Wu Kan, a money manager at Shanghai-based Dragon Life Insurance Co., which oversees about US$3.3 billion.

    The Shanghai Composite reached a three-year high Nov. 12, while the Hang Seng index of Hong Kong shares traded at the highest in almost two months Nov. 14.

    “News of the stock connect has already been fully digested and priced in,” Wu said. “Investors won’t enter the markets to buy shares at such levels now.”

    While the link has “huge” potential, one concern that may be curbing participation is a requirement for international investors to deliver stocks to a broker before markets open if they plan to sell in Shanghai, said Nick Ronalds, managing director for equities at the Asia Securities Industry & Financial Markets Association. The pre-delivery requirement contrasts with rules in most major markets that let investors transfer shares after placing the sell order.

    But while buying has fallen from Monday to yesterday, fund managers were hesitant to call the experiment a failure. They noted that the trading link, which was billed as a momentous opening of China’s capital markets, is still in its early days.

    “I consider this program a big step forward,” said Caroline Maurer, a portfolio manager at Henderson Global Investors, which manages US$124 billion in assets, and hasn’t participated in the program yet. “I wouldn’t worry too much about the short-term market sentiment.”

    Day three of the trading link, which has opened up mainland companies valued at US$2 trillion to foreign investors, saw just about 8 percent of the US$2.1 billion daily quota for Shanghai stocks bought up after the morning session.

    More than 80 percent of the quota had been exhausted at the same time Monday, and the plan was fully used up by the early afternoon. On Tuesday, about 20 percent of the daily quota into Shanghai was bought up by noon.

    The Hong Kong portion of the trading link, which has opened up stocks such as HSBC Holdings to mainland investors, continued to be less popular than the Shanghai portion.

    Slightly more than 1 percent of the US$1.7 billion daily quota for Hong Kong stocks was bought up in the morning session, compared with 11 percent at the same time Monday. At the end of Monday, 17 percent of the quota had been bought up. On Tuesday, by the end of the morning session, just 3 percent had been bought up.

    (SD-Agencies)