Mainland stocks rose to a six-month high yesterday after the market regulator said it would lift the quota for overseas investors investing in A shares by 10 times.
The Shanghai Composite Index rose 3.06 per cent to 2,311.74 points, the highest close since June last year. In Hong Kong, the H-share index gained 1.36 per cent.
The market was buoyed by speculation that rising foreign capital inflows may bring brokerages more clients. Citic Securities rose 6.9 per cent to close at 13.59 yuan (HK$16.90).
UBS Securities strategist Chen Li said the expansion of quotas would bring long-term benefits to the A-share market amid the regulator's plan to deepen market-based reform.
But that may not be enough to support a strong rally for A shares over the short term, since the target would be achieved step by step as the mainland fine-tunes its financial market.
In Hong Kong, brokerage shares also rose strongly after the People's Bank of China last Friday said plans were under way for trials of its qualified domestic individual investor scheme.
Guotai Junan leapt 12.1 per cent to HK$3.80, while First Shanghai soared 21.3 per cent to 91 HK cents and Shengyin Wanguo rose 18.1 per cent to HK$3.20.
Investors see QDII2 as a new version of the H-share "through-train" scheme that was announced in August 2007.
Desmond Tjiang, a fund manager at PineBridge Investments, said the impact of QDII2 would be "marginally positive" for Hong Kong equities. "The narrowing gap between A and H shares has made H shares less attractive than they were in 2007, when H shares were trading at a huge discount to A shares," he said.