Hong Kong stocks set for more gains in 4th quarter, drawing support from capital inflows

HSBC has issued a bullish forecast for Hong Kong stocks in the fourth quarter, banking that capital inflows will continue despite the potential risk of a US interest rates hike and a backlash from the Brexit factor.

Southbound investment inflows through the Shanghai Hong Kong stock Connect rose to 10.8 per cent of turnover in September, compared to 3.5 per cent of turnover in December of last year.

“The capital inflows from the Chinese mainland to Hong Kong will not ease in the short term,” HSBC global asset management senior market specialist Grace Tam said.

Tam said the further relaxation of the Shanghai Connect and the launch of Shenzhen Link will provide mainland investors more channels to invest on the Hong Kong market. Foreign assets are looking increasing appealing as Chinese investors weigh up the outlook amid continuing depreciation expectations for the Chinese yuan.

Under Shenzhen-Hong Kong Stock Connect, approximately 417 eligible stocks will be covered, while 318 are available to Shanghai investors.