Follow Hong Kong Investment Immigration and Hong Kong Economy: Following the Mainland stock market, the Hong Kong stock market welcomed a bull market this week. The Shanghai Composite Index rose by a cumulative 4.4% over the week, stabilizing at 4,000 points on the 10th. Driven by southbound capital, Hong Kong stocks also saw multiple indicators hit historical records, with main board turnover exceeding HK$200 billion for three consecutive days. Industry insiders here analyze that the accelerated pace of connectivity between the Mainland and Hong Kong capital markets will add new momentum to the performance of both stock markets.
The China Securities Regulatory Commission (CSRC) issued new guidelines at the end of March, allowing public funds without Qualified Domestic Institutional Investor (QDII) status to purchase stocks through the "Stock Connect." According to data from the Asset Management Association of China, as of the end of February this year, there were 725 stock funds in the Mainland with a net asset value of 1.4 trillion yuan, all of which are eligible to invest in Hong Kong stocks.
The enthusiasm of Mainland capital flowing south to absorb Hong Kong stocks continues to ferment. The Hong Kong Hang Seng Index rose steadily throughout this week, once surging by 1,600 points on the 9th, with a cumulative weekly gain of 1,997 points, an increase of 7.9%, marking the largest single-week gain in nearly three years.
The "Shanghai-Hong Kong Stock Connect," which has been launched for about half a year, has contributed significantly to this rally. Hong Kong Exchanges and Clearing Limited (HKEX) issued a statement on the 8th, stating that the active trading of the "Shanghai-Hong Kong Stock Connect" has pushed the Hong Kong securities market to hit multiple new highs. Among them, the daily quota of 10.5 billion yuan for the southbound "Stock Connect" was exhausted on both the 8th and 9th, marking the first time the quota has been exhausted since the "Shanghai-Hong Kong Stock Connect" was launched last year.
HKEX Chairman Chow Chung-kong stated that the "Shanghai-Hong Kong Stock Connect" is a major catalyst for the record-breaking turnover in the Hong Kong securities market, introducing new liquidity to the market. In particular, the clarification of policies by Mainland regulatory authorities regarding the participation of institutional investors in the "Shanghai-Hong Kong Stock Connect" has further enlivened the market.
Ben Kwong, Director and Head of Research at KGI Asia, analyzed that many A+H shares (stocks listed in both A-shares and Hong Kong stocks) in the Mainland stock market have a huge premium over Hong Kong stocks. Coupled with the fact that the A-share market is mainly composed of retail investors who focus on policy direction, it is expected that more Mainland investors will pour into the Hong Kong stock market. The massive inflow of capital will help Hong Kong stocks maintain their upward trend.
The "Shanghai-Hong Kong Stock Connect" has opened up connectivity between the Mainland and Hong Kong markets. Charles Li, Chief Executive of HKEX, stated that the "Shanghai-Hong Kong Stock Connect" has allowed international institutional investors who advocate value investment concepts to have a "historic intersection" with the retail-dominated Mainland investor group, ushering in a new era for the development of China's capital market.
In addition, the "Shenzhen-Hong Kong Stock Connect" is expected to be launched in the second half of the year, and the rules for the "Shanghai-Hong Kong Stock Connect" are also expected to be further optimized. BOC International released a research report pointing out that the potential launch of the "Shenzhen-Hong Kong Stock Connect" will further promote connectivity between the two capital markets. It is expected that the Mainland A-share investment culture will influence the Hong Kong market, with state-owned enterprise reform, the "Belt and Road" initiative, "Internet Plus," and monetary policy becoming the four key investment themes.
The activity in the Hong Kong stock market has also strengthened the Hong Kong dollar. The Hong Kong Monetary Authority (HKMA) injected HK$3.1 billion into the market on the 9th and another HK$6.2 billion on the 10th, the first time the HKMA has intervened since August last year. The HKMA stated that with the recent rise in the stock market, the demand for Hong Kong dollars has also increased.
Kenny Tang, Head of Research at AMTD Financial Planning, believes that benefiting from the inflow of Mainland capital, Hong Kong investors are optimistic that the upward trend of Hong Kong stocks is not over, and positive factors will drive the continued strength of Hong Kong stocks. He estimates that capital will continue to pour in, and Hong Kong stocks could head towards 32,000 points.
The connectivity between the two capital markets brings new opportunities. Charles Li stated that the influx of new Mainland investors brings vitality and unprecedented trading opportunities to the Hong Kong stock market. At the same time, the differences in investment concepts and risk awareness between the two regions also bring new challenges and risks to Hong Kong investors. How to remain calm and cautious in an exuberant market is a question that every investor must consider.
