Hong Kong Stocks Surged as Mainland Investors Flooded Market with Cash
Hong Kong stocks surged in the past two days as investors in the mainland has flooded the market with cash. The Hang Seng Index hit the highest point in seven years and continues to soar pushing the market up 6.6 percent for this week and 14 percent for the year.
Analysts stated that the investors form the mainland are looking into Hong Kong after seeing a dramatic 22 percent surge this year created by the Shanghai Composite which made the market too expensive. A lot of China’s largest companies are dual listed in Shanghai and in Hong Kong and investors have turned a profit by playing off the different prices in shares on the two markets. Trading activity is also flooding the Hong Kong market using the stock connect program that links trading in Hong Kong and Shanghai markets.
The anticipated program drew a little interest from investors at the beginning, but somehow the China Securities Regulatory Commission started letting mutual funds invest using the stock connect has help boost trading volume. The stock connect program has a daily quota for trading activity in both directions one from the mainland and the other in Hong Kong and in reverse. Traffic from Shanghai to Hong Kong maxed out the daily limit for the first time in Wednesday and was repeated the following day.
The Shanghai Composite and Shenzhen Composite markets posted staggering gains with Shenzhen spiking over 47 percent turning to into the world’s top performing index. And Chinese stocks are making a comeback in the United States.
The Shanghai Composite and Shenzhen Composite markets have posted staggering gains to date, with Shenzhen spiking over 47 percent, making it the world’s top-performing index. Meanwhile US listed Chinese technologies stocks are catching up in valuations and the industry is traded in the home market at 220 times which reported profits.