Hong Kong stocks end higher after daily quotas quadrupled for Stock Connect links
Daily southbound and northbound quotas quadrupled for Shanghai-Hong Kong and Shenzhen-Hong Kong connects to 42b yuan and 52b yuan, respectively
Stocks in Hong Kong and mainland China ended higher on Wednesday, after Beijing announced that it would quadruple the daily quotas for the Hong Kong-Shanghai and Hong Kong-Shenzhen Stock Connect trading links in a step to bring the city and mainland markets closer.
The move was among a slew of measures to open up of China’s financial sector to foreign investment, unveiled by Yi Gang, the newly appointed governor of the People’s Bank of China at the ongoing Boao Forum for Asia in Hainan province.
“The quota increases are positive as A-shares in Shanghai have been included in the MSCI Emerging Markets Index,” said Kenny Tang Sing-hing, chief executive of Jun Yang Securities. “But in the short term the effect will be limited, as for now only about 70 per cent of the quota is being used.”
The benchmark Hang Seng Index rose 0.55 per cent, or 168.97 points, to 30,897.71, gaining for a fourth straight day although turnover slipped to HK$132.97 billion (US$16.94 billion) from Tuesday’s HK$138.35 billion.
The Hang Seng China Enterprises Index, or the H-share gauge, was virtually unchanged at 12,324.68.
Separately, the PBOC governor said a stock link between Shanghai and London was being planned and should be effective as soon as this year.
The central bank announcements come after President Xi Jinping’s keynote address in the Boao Forum on Tuesday. Xi said that China would accelerate opening up its insurance and banking sector as well as the auto manufacturing industry.
AIA Group outperformed among blue chip insurers, climbing 4.68 per cent to a record high of HK$71.60, and contributing 124 points of the gains in the Hang Seng benchmark index. China Life Insurance rose modestly by 0.23 per cent to HK$22.05 per cent and Ping An Insurance (Group) edged up 0.18 per cent to HK$85.60.
Financials were mixed, with China Construction Bank easing 0.37 per cent to HK$8.31.
The China Securities Regulatory Commission said on Wednesday that daily southbound and northbound quotas for each of the Shanghai-Hong Kong and Shenzhen-Hong Kong connects will be quadrupled starting from May 1. They will rise to 42 billion yuan from 10.5 billion, and 52 billion yuan from 13 billion, respectively.
“We appreciate the regulators have been responsive to evolving market needs,” said Charles Li Xiaojia chief executive of the Hong Kong stock exchange.
Gao Li, a spokeswoman for the China Securities Regulatory Commission (CSRC), said the expanded stock connect quotas were aimed at expanding the scope of the opening up of mainland Chinese and Hong Kong capital markets to each other.
“It [the move] helps overseas institutional investors participate in the A-share market and maintain the market stability and safety.”
Mainland Chinese and Hong Kong regulators will continue to work together and strengthen the monitoring of cross-border fund flows, accelerate the implementation of the so-called “see-through surveillance” on investors and brokers, and ensure the Stock Connect scheme runs smoothly, she said.
Ashley Alder, chief executive officer of the Securities and Futures Commission of Hong Kong (SFC), said the larger quotas suggest “close and intense cooperation between the SFC and CSRC” and his commission will “work closely with the CSRC to the implementation of the new quotas”.
Oil and energy stocks rallied in Hong Kong after it was reported that Saudi Arabia was seeking higher prices before the initial public offer of its state energy giant, Aramco.
PetroChina’s shares in Hong Kong leapt 3.75 per cent to HK$5.53, CNOOC climbed 4.16 per cent to HK$12.02 and Kunlun Energy climbed 1.48 per cent to HK$6.85.
In mainland trading, the Shanghai Composite Index rose 0.56 per cent to 3,208.08, and the CSI – which tracks large caps listed in Shanghai and Shenzhen – added 0.28 per cent. The Shenzhen Composite Index was up 0.53 per cent, but the Nasdaq-style ChiNext fell 0.05 per cent.
Software and intellectual property sectors surged after Beijing said it would not comply with US requests to stop subsidising industries related to its “Made in China 2025” initiative, such as robotics and artificial intelligence. President Xi said on Tuesday that China would improve intellectual property protection.
Shanghai Wondertek Software Corporation, Shanghai Koal Software and Beijing Certificate Authority all rose by their 10 per cent daily limit.