Photographer: Jerome Favre / Bloomberg
Photographer: Jerome Favre / Bloomberg
Hong Kong stockbrokers are about to find out if the $ 7.1 trillion market can survive without its biggest source of cash flows.
Starting on Tuesday, commercial calls through the Hong Kong exchange operator, allowing traders on the mainland to buy domestic shares, will be stopped until February 17th due to the Lunar New Year holiday. Stock connect close will hit the curb at record entry levels that helped propel the Hong Kong stock market to its best start to the year since 1985.
Investors north of the border became bargain hunters in late 2020, after evaluations in some onshore sectors have reached the highest level in more than a decade. Mainland Chinese investors bought a total of nearly $ 48 billion in Hong Kong shares in the first five weeks of this year, which is already more than half of the 2020 total.
“We think it may be worthwhile to make a profit before the commercial link for shares that are strongly driven by southern investors is broken,” including Tencent Holdings Ltd. Meituan and China Merchants Bank Co Ltd, said Zhuang Jiapeng, fund manager at Shenzhen JM Capital Co.
Still, the incentive to withdraw money from the market is low, as people who exchange investment ideas during the holiday can generate additional gains when ties with Shenzhen and Shanghai are reopened. Zhuang said he is considering transferring all of his fund’s assets to Hong Kong sometime this year, compared to his current 70% exposure.
While closing calls for the Lunar New Year is an annual occurrence, traders are taking a closer look, given this year’s unprecedented flows. Tencent, for example, saw the south direction volume of business via links represent about 42% of the daily stock average volume of business so far this year, according to data compiled by Bloomberg.
Investors say long-term exposure to Hong Kong is attractive, given the number of mutual funds that accumulate in the city’s assets. The financial center is the site for a growing number of lists of major startups and technology giants, including the short video platform Kuaishou Technology, which debuted on Friday. Tencent Music Entertainment Group selected banks to organize its planning second listing in the city.
“Hong Kong shares will remain attractive to the mainland, while outperformers in A shares have skyrocketed and the ratings are insane,” said Dai Ming, fund manager at Hengsheng Asset Management Co. “We are still only in the beginning of a long-term purchase. Hong Kong stock trend trend. “
– With the help of John Liu, April Ma and Jeanny Yu