The recent surge of cash from mainland Chinese investors into shares of firms listed in Hong Kong has begun to change the character of the city’s stock market, The Wall Street Journal reported.
Mainland investors plowed a net 26.4 billion yuan (US$4.25 billion) into stocks traded in Hong Kong between Wednesday and Friday last week, sending shares of Hong Kong-listed Chinese companies skyrocketing and the city’s share-trading volumes to record highs.
But blue chips such as HSBC Holdings plc (00005.HK), CK Hutchison Holdings Ltd. (00001.HK) and Swire Pacific Ltd. (00087.HK) weren’t among the 10 most traded by mainland investors.
Instead, these investors have focused on names recognized in China or firms that are dual listed and trade at a wide discount in Hong Kong.
Firms such as Hanergy Thin Film Power Group Ltd. (00566.HK) and Golden Eagle Retail Group Ltd. (03308.HK) have attracted significant turnover through Shanghai-Hong Kong Stock Connect, which links the two stock exchanges.
“Chinese investors are aware that the pricing power of large-cap in Hong Kong is controlled by institutional investors, especially overseas investors,” Wang Zhihua, chief investment officer and portfolio manager of CSOP’s China New Balance Opportunity Fund, was quoted as saying.
“So generally, the investors coming from mainland China would trade small-cap instead of large-cap.”
Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said in a blog post Thursday that mainland investors bring “differences in investment values, risk awareness and regulatory cultures”.
Li said their arrival “will bring new challenges and risks to Hong Kong investors, particularly retail ones. Staying calm and exercising caution in a more active market will be a challenge to each investor in Hong Kong”.
The share price of GOME Electrical Appliances Holding Ltd. (00493.HK), one of the top two Chinese electronics retailers, rose 46 percent in the last three days of last week.
It was the stock most-traded by mainland investors Friday via Stock Connect.
Two mainland blue chips that surged were railway giants CSR Corp. Ltd. (01766.HK) and China CNR Corp. Ltd. (6199.HK), which each rose more than 18 percent after they announced they received regulatory approval from Beijing to merge.
Mainland investors scooped up the stocks, making CSR the top traded company through Stock Connect on Wednesday and Thursday. It was among the top five Friday.
Hong Kong-listed H shares trade at an average discount of 23.4 percent to the mainland-listed A shares of the same firms, even after last week’s rally, which boosted the Hang Seng Index by 7.9 percent.
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