Date
24 January 2017
Hong Kong equities are benefiting from mainland fund inflows but fund flows can always reverse at the first sign of trouble. Photo: HKEJ
Hong Kong equities are benefiting from mainland fund inflows but fund flows can always reverse at the first sign of trouble. Photo: HKEJ

Fund flows: They come and go without notice

Among a set of favorable factors, mainland interest in Hong Kong equities is receiving probably the most attention.

One can sense the excitement with a glance at reports from local and Chinese media.

China Securities Journal listed some of the hot picks of mainland investors in a recent report.

Citing data provider Wind, the newspaper said blue chips such as HSBC Holdings (00005.HK), ICBC (01398.HK), Tencent (00700.HK) and China Overseas Land & Investment (00688.HK) have seen strong fund inflows in September.

With the Shenzhen-Hong Kong stock link up and running soon, the consensus is that fund flows from China can only get bigger in the near future.

A similar situation was prevalent last year when China equities were rising through the roof.

Strong fund inflows into Chinese equities were also seen at that time, along with a big number of new investors who rushed to open securities accounts.

Even President Xi Jinping weighed in to support the bullish expectations.

We all know what happened next.

Shanghai’s benchmark index tanked and is still 40 percent below the 2015 peak even after a series of artificial measures to prop up the market.

In whatever market, the flow of funds can always change sharply in volume and direction.

While Hong Kong stands to gain from mainland fund inflows, there is no guarantee those funds will keep coming.

Worse, mainland funds can always choose to leave at the first sign of trouble.

– Contact us at [email protected]

RT/RA

EJ Insight writer

EJI Weekly Newsletter

Please click here to unsubscribe