The stock market through train between Hong Kong and mainland China which starts today is being called a once-in-a-decade policy-driven bonanza.
Mainland retail investors that meet the 500,000 yuan (US$81,570) trading account threshold can invest in the Hong Kong stock market on the cross-border platform.
Many see it as a revival of the ill-fated Hong Kong stock link which was scrapped in 2007.
Previously, mainland institutions and major individual investors could only invest overseas through the qualified domestic institutional investor scheme or through other means in the grey market.
Shanghai-Hong Kong Stock Connect, as the cross-border trading program is called, offers an additional channel.
Opinions vary as to what types of Hong Kong-listed shares will benefit.
A recent survey by Tophold, a Shanghai-based social platform popular among mainland investors, found that individuals prefer stocks that are traded in both markets as well as certain counters related to gaming, IT and telecommunications.
The top 10 most coveted counters are Shanghai Electric (02727.HK), Tencent (00700.HK), Geely Automobile (00175.HK), Li Ning (02331.HK), China Mobile (00941.HK), BYD (01211.HK), China Telecom (00728.HK), Fosun International (00656.HK), Tsingtao Brewery (00168.HK) and HKEx (00388.HK).
Huang Hua, vice president of mainland trading house Qilu Securities, said Hong Kong blue chips such as Cheung Kong Holdings (00001.HK) could be a draw for mainland funds while small caps would appeal to individual Chinese investors.
Will the stock link bring an instant and sustained rally in Hong Kong stocks?
Some observers don’t expect a massive, immediate capital inflow from the north because a market like Hong Kong, which is dominated by institutional players and where stock valuations are higher than those in Shanghai, may not be so appealing to mainland investors.
Also, mainland retail investors tend to look for quick gains. It will take time before speculative capital inflows turn into long-term transactions.
Zhang Qianhao, Tophold executive director, hopes Stock Connect can change the ethos of the mainland market although speculation can also be rampant elsewhere.
The share price of a mainland counter can go up by several multiples today on nothing but rumors and plunge the next day, he said.
By contrast, professional investors such as hedge funds in Hong Kong or the United States will only “make their bet after meticulous analyses”.
China International Fund Management, a joint venture between Shanghai International Trust & Investment Co., Ltd. and J.P. Morgan Asset Management, said recent gains in the Hong Kong market have priced in the cross-border trading link.
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