News spokesman of the China Securities Regulatory Commission (CSRC) recently disclosed that various preparations for launching Shenzhen-Hong Kong Stock Connect program are under progress, fuelling expectation on that it will be launched soon. Overseas capital now moves faster into the ChiNext ETF of A-share market. Data shows that the CSOP SZSE ChiNext ETF saw a net inflow of around 23 million Hong Kong dollars on Aug .15, being subscribed by foreign capital for the sixth time this month.According to market participant close to CSOP Asset Management Ltd., the CSOP SZSE ChiNext ETF saw a net subscription of around 23 million Hong Kong dollars on Aug .15, representing the sixth subscription by foreign capital this month and also the biggest one since early August. The six subscriptions add 5.5 million units to the ETF, meaning that over 40 million Hong Kong dollars flow to China’s ChiNext Board through RQFII.
Some analysts point out that unlike A50 ETF, the CSOP SZSE ChiNext ETF tracks domestic ChiNext Board Index and has no hedge tools in the overseas market. Therefore, the subscription of the CSOP SZSE ChiNext ETF by foreign capital shows that they are truly rosy about the future trend of the ChiNext Board.
Besides the capital inflow into primary market, the CSOP SZSE ChiNext ETF also surged with increased turnover in the secondary market recently with its market price constantly beating net value. As of the ending hours of Aug. 15, the HK dollar-denominated part of the ETF closed at 9.75 HK dollars, representing a premium of 2.33 percent, while the yuan-denominated part of the ETF ended at 8.31 yuan, indicating a premium of 1.76 percent, showing that the market is optimistic about the ETF in the short run.
In fact, since the regulators made it explicit that Shenzhen-Hong Kong Stock Connect will surely be launched within 2016 and 3-4 months preparation is needed by the stock exchanges and securities traders at both sides, various parties in the market show stronger expectation on the launch of Shenzhen-Hong Kong Stock Connect program as August comes.
The attitude declared by regulators makes the market believe that Shenzhen-Hong Kong Stock Connect program “can be launched at any minute”. Some institutions even forecast that details about the launch of Shenzhen-Hong Kong Stock Connect program might be unveiled this week. According to analysts, “though the scheme for Shenzhen-Hong Kong Stock Connect program is yet to be announced, the senior management from both Shenzhen and Hong Kong Stock Exchanges indicated in different occasions that the first batch of stocks listed on Shenzhen Stock Exchange to be included into the Shenzhen-Hong Kong Stock Connect will surely be those most representative ones. Given the mature operation mechanism and large trading volume of the ChiNext Board, the market is rosy about the inclusion of ChiNext-board-listed stocks into the Shenzhen-Hong Kong Stock Connect. The inflow of capital into the ChiNext ETF is as might have been expected”.
In addition, HSBC securities believes that according to the experience of Shanghai-Hong Kong Stock Connect program, the expectation on launching Shenzhen-Hong Kong Stock Connect program in the short run might boost the performance of small-cap stocks. The performance of large-cap stocks outstripped that of small-cap ones in Hong Kong market in the past 14 months and market focus might be shifted from large-cap stocks to small-cap ones. In fact, the average daily trading volume of the components of the Hang Seng Composite SmallCap Index obviously expanded in the past month, suggesting that the market sentiment and trading of small-cap stocks are improving.
Translated by Jennifer
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