Mainland traders ride on high risk appetite to snap up Hong Kong stocks at unprecedented pace
- Chinese investors have spent US$35.7 billion buying Hong Kong shares this year through the Stock Connect programme, the most in the same period since 2016
- Strong southbound inflows add to speculation about state buying to defend Hong Kong’s position as a financial centre
While foreign and local investors have been fleeing Asia’s third-largest market amid fears of rising unrest and an escalation in US-China tensions, Chinese traders have been buying shares at an unprecedented pace via a cross-border investment scheme.
The HK$276.5 billion (US$35.7 billion) pumped into shares listed on Hong Kong stock exchange through the Stock Connect programme year to date is also the most for the same period since December 2016, according to Bloomberg data. Most of the buying was focused on big Chinese companies trading in the former British colony, such as Industrial and Commercial Bank of China and China Construction Bank.
The buying pattern has fuelled speculation that Beijing may have been intervening to prop up the US$4.9 trillion market to defend the city’s status as a financial hub after China’s move to impose a security law triggered the biggest sell-off in five years last month. Any mainland individual or institution with 500,000 yuan (US$70,274) in their trading accounts is eligible to access Hong Kong stocks through the Stock Connect.
When the Hang Seng Index tumbled 5.6 per cent on May 22, mainland investors spent HK$4.4 billion buying Hong Kong stocks – the most purchase in two months. Inflows have been so strong that net selling was recorded on only six days this year.