Hong Kong – Shanghai Stock Link Opens for Business

International investors poured money into Chinese stocks on Monday, taking advantage of a new program that links markets in Hong Kong and Shanghai.

Previously, only pre-approved institutional investors could invest in the Chinese market. But now, the Shanghai-Hong Kong Stock Connect allows any investor to buy select Shanghai stocks through the Hong Kong Stock Exchange, and vice versa, with trading in both directions subject to daily trading caps.

International investors buying Chinese stocks reached the daily cap of 13 billion yuan ($2.1 billion) by roughly 2 p.m., according to the Hong Kong Stock Exchange.

Chinese investors buying Hong Kong stocks are far less enthused about the new program, said Michael Liang, chief investment officer of Foundation Asset Management.

That’s because many Chinese stocks traded in Hong Kong — big banks, insurers, oil companies — are already listed in Shanghai, and available to Chinese investors. Plus, they’re often cheaper in Shanghai versus Hong Kong.

“There’s no reason to come to Hong Kong for this,” Liang said. “But there are some value plays, some growth stories here — very unique, like Tencent, AIA, Hong Kong Exchange — which we don’t have in China.”

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza