Date
19 September 2017
Market observers expect the daily trading limits to be reached within the first few hours of trading today. Photo: HKEJ
Market observers expect the daily trading limits to be reached within the first few hours of trading today. Photo: HKEJ

Millions of mainlanders ready to plunge in as stock link opens

Millions of Chinese investors are ready to jump in as direct share trading between Hong Kong and Shanghai begins Monday.

Thousands are institutional funds looking to tap into one of the world’s busiest stock markets.

On Friday, hundreds of people in Shanghai waited in line outside securities offices to open trading accounts, mostly above one million yuan (US$163,145), Ming Pao Daily reported Monday.

Hong Kong-Shanghai Stock Connect, as the trading scheme is called, allows investors from both sides to invest in each other’s stock market.

Mainland regulators require investors to have at least 500,000 yuan in their trading accounts, the report said.      

About 1.42 million accounts were eligible as of April when the scheme was announced, according to China Securities Depository and Clearing Corp. Ltd.

The number had surged to 2.03 million by the end of October, up 43 percent.

Victoria Mio, lead portfolio manager of Robeco Chinese Equities, said most of the mainland players are retail investors who prefer smaller stocks.

They pay little attention to stock dividends because they tend not to hold stock for a long of time, she said.

The total cross-border trade quota will be capped at 250 billion yuan (US$40.48 billion) for Hong Kong-listed stocks, with a daily ceiling of 10.5 billion yuan, and 300 billion yuan for Shanghai shares with a daily ceiling of 13 billion yuan.

On Saturday, 97 investors were invited to trial the new scheme in which the daily limits were reached within two hours of simulated trading.

Market sources predict a similar result in Monday’s trading debut, the report said.

Hong Kong Economic Journal chief consultant Cho Chi-ming is unimpressed with the scheme, saying it mixes “dirty water from the mainland with clean water in Hong Kong”. 

Cho expects short-term market frenzy at the beginning and warned investors to think twice before buying into an expensive market.

He said the Hong Kong market is substantially up since the announcement of the scheme in April.

– Contact us at [email protected]

EL/AC/RA

EJI Weekly Newsletter

Please click here to unsubscribe