Bigger quotas seen for Hong Kong-Shanghai stock link after record week for Hang Seng

The city's stock exchange chief yesterday flagged a possible increase of more than 30 per cent in the quota for cross-border share trading after record turnover saw the cap on mainland purchases of Hong Kong stocks being busted on two of the past three days.

Fund managers have been pressing for the quotas under the through train scheme to be raised, fearing the allocations will be exhausted within weeks as the market rally heats up.

The rally, which began this week as the market resumed after the Easter holiday, has triggered capital inflows. The strong demand for the Hong Kong dollar prompted the Hong Kong Monetary Authority to step into the market twice yesterday, with injections of HK$6.2 billion and HK$6.975 billion, to defend the unit. That followed a HK$3.1 billion injection on Wednesday.

"Demand for the Hong Kong dollar grew alongside the rise in the market recently," an HKMA spokesman said last night. "We will monitor the market closely."

The Hang Seng Index rose 1.22 per cent yesterday to 27,272.39 points, ending a tumultuous week that saw the benchmark surge 7.9 per cent in the three trading days after the holiday. Turnover hit a record HK$293.9 billion on Thursday, three times the normal volume.

The frenzy has been driven by mainland investors seeking to exploit a discount on the H shares of mainland stocks against their A-share counterparts after a sustained rally across the border.

A move by Beijing to allow mainland fund houses to invest in the Hong Kong market has also spurred trading in the scheme that links the city's exchange with Shanghai's.