Chinese money is pouring into the battered Hong Kong stock market, underlining the growing influence of mainland traders as political unrest threatens to undermine the city’s status as a global financial center.
Mainland investors’ holdings of Hong Kong-listed stocks purchased through market links to Shanghai and Shenzhen hit a new record high of $ 235.7 billion on Tuesday, according to Financial Times calculations based on data from Bloomberg.
On Monday, purchases of Hong Kong shares on the mainland through Stock Connect programs hit a new daily high of $ 2.5 billion. The wave of buying came in the wake of the Trump administration’s sanctions targeting major Chinese tech groups, many of which are listed in Hong Kong.
Figures reflect investors on the continent growing role in the Hong Kong stock market as Beijing seeks to integrate the city, which has been torn apart by political chaos, more closely into China’s financial system. Credit Suisse estimates that these investors hold around 8.5% of Hong Kong’s free float market capitalization and account for more than 20% of daily revenue.
“The turnover in terms of [Stock] Log on, it’s huge, ”said Louis Tse, managing director of Hong Kong-based brokerage firm Wealthy Securities. Part of the appeal of Hong Kong stocks, he added, could be that they “look very cheap and also offer a reasonable return.”
In Monday’s record-breaking session, mainland Chinese investors made $ 500 million in net share purchases of both tech group Tencent and state-owned telecommunications company China Mobile.
China Mobile, along with its state-owned counterparts China Unicom and China Telecom, was forced on Friday to write off his actions of the New York Stock Exchange following an executive order from the White House. All three have jumped more than 12% in trading in Hong Kong this week.
The Trump administration would also have been consider a ban on US funds investing in Chinese technology groups, including Tencent.
“It has been a long time since these stocks have fallen to these levels and it has been artificially forced,” said Andy Maynard, a trader at China Renaissance in Hong Kong. In addition to vigorous buying by mainland retailers, “institutional investors see this as a good way to go long term.”
Last year, buyers in mainland China made $ 87 billion in net purchases of Hong Kong shares through Stock Connect programs.
The Hang Seng Index, which fell 3.4% last year, has lagged far behind international and mainland Chinese benchmarks as Hong Kong’s economy has been hammered by the coronavirus pandemic. A sweep national security law Beijing-imposed in June that followed months of anti-government protests raised concerns about Hong Kong’s future as a global financial center.
More than half of the net inflows of buyers from mainland China came after the introduction of the security law, according to the data.
“After all the protests and Covid in the market there, people here think the prices are probably at their lowest and this presents a buying opportunity,” said a director of a Shanghai-based brokerage house .
“This is the kind of trading you do if you think Hong Kong is going to be doing well in the long run,” he added.