Breaking News
Black Friday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

China's market euphoria trumps political risk in Hong Kong

Stock MarketsJul 09, 2020 07:50
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: An investor watches a board showing stock information at a brokerage office in Beijing

By Samuel Shen and Noah Sin

SHANGHAI/HONG KONG (Reuters) - Investors in China's soaring stock market are increasingly turning to Hong Kong for bargains, egging on an investment boom on the back of large tech listings and shaking off fears of political risks in the bruised financial hub.

The country's blue-chip CSI300 index (CSI300) hit five-year-highs in recent sessions on a state-endorsed rally and a retail trading frenzy.

But Chinese investors and brokerages say they are increasingly drawn by Hong Kong shares, whose gains have been more modest.

"Elephants are dancing (in mainland China), but in Hong Kong, many stocks are lying on the floor," Shen Weizheng, senior advisor at brokerage Direct Access, said during an online pitch to mainland investors on Wednesday.

"Buy more Hong Kong stocks. You don't lose money buying bargains."

Mainland-listed A-shares are on average 35% more expensive than their Hong Kong-listed peers, also called "H-shares" (HSCE), widening from 23% just a month ago (HSCAHPI). Share prices of the same company often differ vastly in the two markets.

A growing number of U.S-listed Chinese internet companies, including NetEase (HK:9999) and JD.com (HK:9618), have chosen to float in Hong Kong through secondary listings amid heightened Sino-U.S. tensions.

New York-listed Alibaba (HK:9988) (N:BABA), which completed its Hong Kong listing last year, could get the greenlight to enter the benchmark Hang Seng Index (HSI) next month.

"Capital is flowing into the city. The more intense the rivalry between the U.S. and China, the more unique Hong Kong will be as a centre to welcome back leading Chinese companies listed in the U.S.," said Hao Hong, managing director at BOCOM International.

With many more Chinese listings in the pipeline, "such investment opportunities can last for at least two years, potentially generating annualised returns of 20%," said Richard Li, general manager of Shanghai-based Regan Fund Management Co, which has been actively investing in such listings.

GROWING POWER

The surge in investment from the mainland comes as Hong Kong becomes increasingly isolated from traditional western trading partners due to Beijing's growing political reach into the financial hub.

China's new National Security Law for Hong Kong, effective last week, is the latest flash point between Beijing and Washington, adding to other points of tension such as trade and tech supremacy.

Mainland interest in Hong Kong stocks, however, has only gone up.

Southbound turnover under the cross-border Stock Connect hit record levels on Monday. Net mainland purchases of Hong Kong stocks under connect totaled HK$300 billion ($38.71 billion) during the first six months, exceeding last year's total.

Accelerating Chinese inflows also help strengthen the Hong Kong dollar .

"Stock valuation in Hong Kong is still attractive, so it's natural for abundant mainland money to spill over," said Hong Kong-based online brokerage Futu (O:FUTU). The brokerage, which mainly serves wealthy Chinese, witnessed a surge in trading volume on its platform this year.

Mainland money is largely behind the 230% surge this year in Hong Kong-listed shares of Semiconductor Manufacturing International Corp (SMIC) (HK:0981), which is expected to command lofty valuations when it lists on Shanghai's STAR Market.

For Hong Kong stocks such as SMIC, "what's happening in the China market is changing the companies' narratives," Liu Youpu, partner at Shanghai-based hedge fund house Aifanzhe Investment Management Co said.

"We expect to see growing pricing power by mainland investors in the Hong Kong market."

($1 = 7.7500 Hong Kong dollars)

China's market euphoria trumps political risk in Hong Kong
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Mon Sun
Mon Sun Jul 09, 2020 8:25
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Jealousy and enviness is the disruption to a questionable healthy mental health- Jeaslousy is a disruption to a sound minded mindednesd that leads to a disfunctional questionable healthy mental health - jealousy is distructive weapon leading to a severe mental health which leads to suicides- go for healing - always seeing red light in the progress of other economy which certainly leads to self destruction
Ru Ruisu
Ru Ruisu Jul 09, 2020 8:08
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They printed much more money than US, and hidden from IMF.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email