Two years after the launch of the Shanghai-Hong Kong Stock Connect Programme, the Trading in chinese stocks Kong Trading in chinese stocks is poised to open as early as next week — together both the trading links represent the only direct method for foreign investors to tap into yuan-denominated mainland equities trading without seeking approval from the Trading in chinese stocks government. Market observers have long-awaited its arrival, speculating how much investor interest it will lure in and how successful it will be in attracting trade flows.
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If the Shanghai-Hong Kong Stock Connect is anything to go by, its acceptance by investors will come slowly and steadily. The programme trading in chinese stocks very slowly, as many investors preferred to first observe rather than dive into new territories. With time, aggregate usage of the Stock Connect quota has gradually increased.
But we have seen different reactions from southbound domestic investors buying Hong Kong-listed shares and northbound international investors buying Chinese A-shares investors.
The main factors driving northbound trade flows were risk perception, liquidity concerns and index inclusion. In addition to high volatility, liquidity is also a big concern as A-share companies can voluntarily decide to suspend the trading of their stocks for a number of reasons — and this could last for months.
‘Chinese stock market matures as institutional investors join the party’
This year, Chinese regulators have tightened the rules, and recently we have seen a slow improvement in northbound trading activities. On the positive, the upcoming Shenzhen-Hong Kong Stock Connect Programme will offer more A-share stocks for international investors to choose from, which could increase the interest in northbound trading.
Ultimately, a key factor remains when the MSCI will include Chinese A-shares in their indices — when included in the benchmarks, international institutions and mutual funds will have to start buy them.
The main drivers of southbound trading have been speculative appetite and the depreciation of the yuan.
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Then in the spring ofmainland investors started using southbound trading as a method to speculate that Hong Kong-listed stocks would catch up with the A-share rally given the big valuation gap between the two markets.
This year, prompted by the Chinese yuan depreciation, southbound trading increased trading in chinese stocks mainland institutions and wealthy individuals sought Hong Kong dollar denominated stocks, particular those with high trading in chinese stocks yield.
Two years after the launch, stock markets in Shanghai and Hong Kong have become increasingly correlated, but there continues to be a big difference in the market behaviours opzioni binatie the immature A-share mainland stock market driven by retail speculation, and the highly developed mature Hong Kong stock market.
As the Stock Connect Programme continues trading trading in chinese stocks chinese stocks progress, the two markets will grow closer in characteristic, although slowly.
What does this mean for companies listed in China?
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