Hong Kong’s stock market could remain relatively flat in 2015, with a cross-border trading program launched in November last year unlikely to give a significant boost to local equities, according to a senior executive from Value Partners Group.
Unlike the recent rally in mainland stocks, the outlook for the Hong Kong market doesn’t look too rosy despite the Shanghai-Hong Kong Stock Connect, said Eric Chow Yik-Cheung, investment director at Value Partners Hedge Fund, a unit of Value Partners Group Ltd. (00806.HK).
Prohibition on short-selling of A shares in the mainland will restrict investors from hedging against those stocks there, even as they make bets on their equivalents listed in Hong Kong, the Hong Kong Economic Journal cited Chow as saying in an interview.
As such, what investors may do will be purchases in the A-share market but hedging through short-selling of those equivalent stocks in Hong Kong or related exchange-traded funds, he said.
Funds will continue to flow into the mainland market given favorable sentiment, particularly toward stocks that have the chance of being included into the MSCI index, Chow said.
Other factors that could have an impact on the Hong Kong stock market include a potential Russian government default and changes in the political environment in Hong Kong, he added.
Value Partners Hedge Fund has raised its weighting of A shares to about 30 percent in November, with healthcare and tourism consumption plays among the top picks.
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