Hong Kong stocks are losing their allure to mainland traders as the city’s biggest stocks suffer from regulatory policy overhang. Their purchases of local stocks have slumped by more than 90 per cent this month, compared with the volumes in the past two months, based on the average daily transactions via the Stock Connect programme. Daily inflows via the trading link’s southbound channel have averaged HK$194 million (US$25 million) in June, compared with HK$2.5 billion in April and HK$2.6 billion per day in May, according to exchange data compiled by Bloomberg. The loss of appetite suggests mainland Chinese investors are reining in their enthusiasm about the outlook in the short-term, with some of the nation’s biggest brokerages split over the market’s direction. Beijing has not let up on a crackdown on tech industry practices and lately on bitcoin trading, while surging inflation has raised the spectre of policy tightening at home and in the US. “There’s an increasing chance that Hong Kong stocks will be due for a pullback in June because of the heightened scrutiny of big tech companies and the [potential] weakness in the US market,” said Gary Ching, an analyst at Guosen Securities. Even cheap valuations in Asia’s second-largest stock market are of little attraction to mainland traders. The 58-member Hang Seng Index is valued at 13.4 times projected earnings, the lowest among the world’s major markets. That compares with the multiple of 22.5 times for companies in the S&P 500 index and 18.7 times for those in Europe’s Stoxx 50. The Hang Seng Index declined for seven straight days through Thursday, the longest streak since December 2015, before regaining some footing on Friday. The gauge slipped back into its sideways trading band last week after a failed attempt to break out of the rangebound pattern of the past three months. The fatigue is a far cry from the days at the turn of the year, when mainland investors bought HK$15.5 billion of Hong Kong stocks per day in January, amid booming sales of onshore mutual funds geared towards offshore markets, before an antitrust clampdown spoiled the mood and roiled investors. Some of the targets in China’s antitrust probes are among the biggest constituents of the Hang Seng Index. Until their cases are resolved, investors are likely to stay on the cautious side for any potential penalties or other nasty surprises. Meituan, the biggest influence on the Hang Seng Index with an 8 per cent weighting, has already lost one-third of its value since the stock peaked on February 17 peak. The outcome of Beijing’s investigation in April into the on-demand delivery service provider is still up in the air. Tencent Holdings, the second-largest index member and also a subject of investigations into its some of its operating units, has largely remained off the hook for now. Its shares have dropped 20 per cent from the peak in January. “Trading is light and that means investors will need to wait for a new direction on the market,” said Central China Securities in a report.