Shanghai-Hong Kong stock link programme fails to sustain momentum
Scheme has yet to attract long-term investors as demand for the northbound quota flows subsides after a strong start on the first day
Trading patterns on the second day of the Shanghai-Hong Kong Stock Connect scheme suggest short-term investors, including hedge funds, are the early movers in the market tie-up.
Hong Kong and international investors yesterday took up 4.85 billion yuan (HK$6.1 billion), or 37 per cent, of the 13 billion yuan daily quota, in sharp contrast to the boom start on Monday when the northbound quota was filled before 2pm.
In Shanghai, investors used only 800 million yuan, or 7.6 per cent, of the 10.5 billion yuan daily quota. They took up 17 per cent on Monday.
The reduced take-up of the quotas and heavy selling in some of the most targeted stocks on Monday indicate the scheme is yet to attract long-term investors.
Strategists point to the absence of investors such as mutual fund houses as a factor in the failure for the scheme to sustain demand for the northbound quota flows, saying many of these trades are driven by short-term strategies.
"After the relatively volatile session on day one, investors are adopting a wait-and-see mentality before they make a decision to join the northbound trade," said Kinger Lau, the chief China strategist at Goldman Sachs.