Date
19 September 2017
Not even Hong Kong blue chips were able to capture the interest of mainland investors. Photo: HKEJ
Not even Hong Kong blue chips were able to capture the interest of mainland investors. Photo: HKEJ

Why through train hasn’t brought much south-bound capital

Exchange rates and lack of information are among the major factors that resulted in lackluster south-bound investment during Monday’s debut of the Shanghai-Hong Kong Stock Connect, columnist T Y Ko wrote in the Hong Kong Economic Journal Tuesday.

News censorship, aimed at restricting sensitive information such as the ongoing pro-democracy protests in Hong Kong, has prevented mainlanders from knowing more about the city’s financial markets, Ko said.

As a result, many mainland investors have yet to develop the motivation to participate in the through-train stock program.

So far, the scheme has mainly benefited Hong Kong-listed stocks with familiar Chinese names, such as Tencent Holdings Ltd. (00700.HK), Phoenix Satellite Television Holdings Ltd. (02008.HK) and China Mobile Ltd. (00941.HK).

Not even Hong Kong blue chips such as Hutchison Whampoa Ltd. (00013.HK) and HSBC Holdings Plc. (00005.HK) were able to capture the interest of mainland investors.

Exchange rate is another key factor as mainland investors have to buy and sell Hong Kong dollars to join the program. 

Given that the renminbi is expected to grow stronger, mainland investors are most likely worried about the exchange rate risk of parking their money in the Stock Connect.

Two other factors are rather short-term. The minimum requirement of 500,000 yuan (US$81,638.14) for a mainland investor to open an account in the program, as well as the poor sentiment in the regional stock markets may also help explain why Hong Kong’s benchmark Hang Seng Index failed to close higher on the debut of the stock through-train, Ko said.

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VW/JP/CG

Freelance journalist

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