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.”