The Shenzhen-Hong Kong Stock Connect program (SZ-HK Stock Connect) on Dec. 5 has been officially launched and operated. The first-day operation was smooth with stable trading, and especially, the Northbound Trading of this program was more active than the Southbound Trading, showing that A-share market becomes increasingly attractive to foreign funds. Although the trading atmosphere was not that active in the two stock markets, as many funds were still waiting and seeing, along with further clear market environment, funds are predicted to become more active in this program on the whole, institutional insiders indicated.
Funds more active in Northbound Trading
In terms of the first-day trading, among 881 targeted stocks in the Northbound Trading, there were 293 ones gaining an uptrend: East Group Co., Ltd. (300376.SZ) soared to the daily limit of 10 percent, Zhejiang Century Huatong Group Co., Ltd. (002602.SZ) and Guangdong Eastone Century Technology Co., Ltd. (300310.SZ) increased over 7 percent, with growth rate of Shenzhen O-film Tech Co., Ltd. (002456.SZ), Chinese All Digital Publishing Group Co., Ltd. (300364.SZ) and other stocks ranking high; among 417 targeted stocks in the Southbound Trading, there were 134 ones achieving growth: China Innovative Finance Group Ltd. (00412.HK) rocketed 31.11 percent, CT Environmental Group Ltd. (01363.HK) soared 19.01 percent, and National Agricultural Holdings Ltd. (01236.HK), China Hanking Holdings Ltd. (03788.HK) and others ranked high regarding to growth rate.
Referring to capital flow, turnover of the Northbound Trading was bigger than that of the Southbound Trading. Up to the closing, figure for the former was 2,669 million yuan, which was all inflow, according to HKEX data. Turnover for the latter totaled at 923 million HK dollars, with inflow of 902 HK dollars and outflow of 21 million HK dollars. Regarding to quotas, the Northbound Trading has a daily quota of 13 billion yuan, with 10,289 million yuan remained, and the balance took up 79 percent of the total quota; while a daily figure of 10.5 billion yuan has been set for the Southbound Trading, with quota of 9,649 million yuan left.
The funds were more active in the Northbound Trading yesterday, as it was related to targets involved in this program, Wang Haitao, overseas-market analyst at Shenwan Hongyuan Securities, thought. Based on quantity, the number of targeted stocks in the Northbound Trading under this program is 881, more than that the Northbound Trading under Shanghai-Hong Kong Stock Connect program. Meanwhile, the targets under the former one are mainly involved in medicine & biology, computer and electronics, with many rare types in H-share market, which are more attractive to foreign funds.
On the first day when SZ-HK Stock Connect program was launched, QFII, RQFII and other institutional investors familiar with trading environment of Shenzhen stock market successively invested in its new-economy and high-growth stocks, so that trading turnover and net inflow for the Northbound Trading under this program were higher than those for the Southbound Trading, Feng Xiaozhong, executive director and also global bank & capital market business director of Hang Seng Bank, indicated.
Rare types in Shenzhen and Hong Kong stock markets pursued by various funds
Gree Electric Appliances, Inc. of Zhuhai (000651.SZ) having plummeted to the daily limit of 10 percent at the closing had become the most attractive one in the Shenzhen stock market for foreign funds, with a total of over 372 million yuan buying this stock through the Northbound Trading, which made it rank No.1 among all targets in the Northbound Trading, HKEX data also shows. The same data was also revealed in the trading turnover ranking list for Shenzhen Stock Exchange, and special seats of the Northbound Trading had invested in Gree Electric Appliances with over 372 million yuan, pushing it to rank No.1 in terms of buying amount. Additionally, Midea Group Co., Ltd. (000333.SZ), Hangzhou Hikvision Digital Technology Co., Ltd. (002415.SZ), Weichai Power Co., Ltd. (02338.HK; 000338.SZ) and other individual stocks ranked high on Dec. 5 according to their buying turnover.
Regarding to the Southbound Trading, its first transaction got Orient Securities Company Limited (03958.HK; 600958.SH) involved yesterday, and investors bought HSBC Holdings PLC (00005.HK) with 24,500 HK dollars. Launch of this program will bring in more opportunities for investors to carry out global asset allocation, investor carrying out the first trading under the Southbound Trading indicated. While as a financial target in H-share market, HSBC Holdings was selected due to two factors. Firstly, the expectation on Fed’s rate hike increasingly arouses, financial stocks listed in H-share market may benefit from U.S. dollar’s appreciation; and secondly, as a blue chip, HSBC Holdings is relatively stable in fundamental factor.
Among active stocks with the first ten turnover in the Southbound Trading under this program, BYD Electronic (International) Co. Ltd. (00285.HK; 002594.SZ) gained a net inflow of nearly 130 million HK dollars; net inflow of over 70 million HK dollars for Chinasoft International Ltd. (00354.HK), and over 28 million HK dollars for H shares of Xinjiang Goldwind Science & Technology Co., Ltd. (02208.HK; 002202.SZ), Vision Fame International Holding Ltd. (01315.HK), Shandong Chenming Paper Holdings Ltd. (01812.HK; 000488.SZ) and ZTE Corporation (00763.HK; 000063.SZ) respectively, ranking No.1, according to HKEX data.
Industry and market value are still important indicators for investors to consider when participating in individual stock trading under SZ-HK Stock Connect program. Based on the turnover of clients on the first day, individual investors took up a major proportion to participate in the Southbound Trading under this program currently, about 90 percent, Haitong Securities Co., Ltd. (06837.HK; 600837.HK) ranking No.1 in terms of the number of opening accounts under this program told the SSN journalist. They are remarkably willing to invest in small cap stocks, and the turnover of these stocks accounted for around 80 percent, and especially, real estate, metal, public facilities and other sectors were greatly pursued by clients.
It is worthy of noting that, besides the said stocks, rare types in the H-share market also attracted much attention of the funds. Lottery sector performed strongly on Dec. 5 in the H-share market; up to the closing, Macau Legend Development Ltd. (01680.HK) increased 3.61 percent, and growth rate of Wynn Macau, Ltd. (01128.HK), Galaxy Entertainment Group Ltd. (00027.HK) and other H shares surpassed 2 percent.
After launch of the mentioned program, types with unique concept in the H-share market attracted much attention, and lottery sector, in particular, institutional insiders pointed out. Furthermore, compared to A shares, these rare types in the H-share market include blue chips with stable stock price and high dividend, which only exist in H-share market, such as HSBC Holdings, Hong Kong Exchanges and Clearing Ltd. (00388.HK) and etc.
Funds possibly more active in future
Investors intended to wait and see based on the indexes and trading data of the two stock markets on the first day, which may be linked to intraday flat performance of these market indexes, Bai Ren, executive director and also retail trading director at BOC International (China), mentioned. At the meantime, some targets in the Southbound Trading under SZ-HK Stock Connect program have already been traded under Shanghai-Hong Kong Stock Connect program, and thus, over 100 medium & small cap stocks newly added in the Southbound Trading under SZ-HK Stock Connect program will possibly take a time to play their role.
“The A-share market and H-share market were both weak yesterday due to impact from external factors. The total trading volume didn’t increase significantly, but it is roughly in line with the expectation, as trading rules and dynamic environments on the two markets are different, investors need time to adapt to the new circumstances. Also, the approaching of the Christmas and New Year Holidays and Donald Trump’s assumption of duty as the US president temporarily increased investors’ sentiment of sidelining,” says Liang Guanye, global investment strategy director of Haitong International Securities Group Limited, a Hong Kong listed company under Haitong Securities.
Laing at the same time believes that more global capitals will flow into the A-share market after the launch of the SZ-HK Stock Connect. The Mainland stock market is currently at the development stage, thus the opening of the stock connect will accelerate the inclusion of A shares in global indexes such as MSCI and FTSE Indices, and attract huge amount of capitals into the A-share market in the future, contributing to the development of the overall market.
Investors are expected to be more aggressive in the middle of next year. If A shares can be successfully added to the MSCI, the market will turn from sidelined to active, says Yuan Shuqin, vice chairman and director of securities business with Credit Suisse’ Greater China region.
Translated by Jelly Yi and Adam Zhang
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