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Greater Bay Area

After Chinese stocks end another year as worst performers globally, mainland investors eye Hong Kong market

  • For Hong Kong investors, stocks listed in the city remain top investment choice, according to Hong Kong Investment Funds Association survey
  • Hong Kong respondents allocated only 19 per cent of their assets for offshore investment, including 8 per cent for mainland China markets, in 2018
PUBLISHED : Sunday, 06 January, 2019, 6:00pm
UPDATED : Sunday, 06 January, 2019, 11:10pm

Investors in the Chinese stock market, the worst performer globally for a second straight year, are keen to diversify assets and consider Hong Kong as their top overseas investment destination, according to a survey released by the Hong Kong Investment Funds Association, a non-profit-making industry organisation, on Sunday.

Mainland Chinese investors are also more keen on investing in the Hong Kong stock market, rather than the other way around, the association said.

China’s thriving bonds, plus hopes for investment reform, trade talks and stimulus should hearten investors in 2019

Capital outflows from China picked up in 2018, as the trade war with the United States weighed on its economy, crimping corporate earnings. Funds are trapped in China, the world’s second-largest economy, in large part due to stringent capital controls.

The HKIFA interviewed 1,026 residents online in the region covered by the “Greater Bay Area” scheme, including 411 from Hong Kong, 200 from Guangzhou, 207 from Shenzhen and 208 from Zhuhai. The Chinese government’s Greater Bay Area scheme aims to integrate Hong Kong with 10 other cities in the Pearl River Delta into an economic and business hub. The respondents were aged between 18 and 55, with either HK$300,000 (US$38,292) or 300,000 yuan (US$43,686.5) or above in liquid assets.

Based on their current investments and excluding the property market, respondents from Guangdong province (where the cities of Guangzhou, Shenzhen and Zhuhai are located), on average, allocated 33 per cent of their assets for offshore investment in the third quarter of 2018, of which 12 per cent went to the Hong Kong market.

In contrast, Hong Kong respondents allocated only 19 per cent of their assets for offshore investment, of which 8 per cent went to mainland China markets.

The take-up rate for cross-border investment channels was also higher among investors in Guangdong, with 44 per cent investing through the stock connects between Hong Kong and Shanghai and Hong Kong and Shenzhen.

Furthermore, 54 per cent of these respondents indicated their interest in using the stock connects in the coming 12 months. Southbound investment, or trading in Hong Kong shares by mainland China investors, through the stock connects eased to HK$452.9 billion in the fourth quarter from HK$583.7 billion in the third quarter of 2018.

Meanwhile, a majority of Hong Kong investors have never invested via the stock connects, and their level of interest in doing so was low, at 71 per cent and 42 per cent, respectively.

Among the various asset classes across different markets, Guangdong investors preferred a more balanced mix in terms of asset allocation, with 32 per cent saying they would allocate in mainland China stocks, 22 per cent in mainland bonds, 20 per cent in Hong Kong stocks and 16 per cent in Hong Kong bonds.

For Hong Kong investors, on the other hand, stocks listed in the city remained the top investment choice, at 54 per cent. They would like to allocate 17 per cent to Hong Kong bonds and 12 per cent to mainland stocks, according to the survey.

What should traders of Hong Kong, China stocks expect after a year of ‘heaven to hell’?

The stock index in Shanghai, mainland China’s benchmark gauge, ended 2018 as the world’s worst market performer, falling by 24.6 per cent over 12 months. Yuan, China’s currency, fell by 5.4 per cent, which makes it the third biggest loser among the 11 most used Asian currencies after India’s rupee and Indonesia’s rupiah.