Trading holds near record levels in mainland Chinese stock markets, while Hong Kong volumes ease
Turnover on mainland China exchanges nudged towards a record on Wednesday, with the Shanghai and Shenzhen stock benchmarks notching up a third day of gains this week.
Trading volumes in both markets was 2.15 trillion yuan (HK$2.69 trillion), just shy of the record 2.16 trillion yuan reached on Tuesday. In contrast, the turnover in Hong Kong was HK$160.09 billion on Wednesday, HK$43.55 billion lower than the previous day, as shares dropped on apparent concerns over weakness in US stocks.
At the end of a volatile day, the Shanghai Composite Index closed up 0.63 per cent to 4,974.71 points, while the Shenzhen Composite Index finished 1.16 per cent higher at 2,918.02 points. It was another record in Shenzhen, while the Shanghai benchmark hit a fresh seven-year high.
“In China's A-share stock market history, liquidity has always been a major driver,” Credit Suisse analyst Vincent Chan said in a report.
Explaining the rise and fall of the mainland indices throughout trading yesterday, Gerry Alfonso, a director of Shenwan Hongyuan Securities, said: “The initial correction was likely driven by investors selling some of their holdings to invest in the new round of IPOs. The market then recovered and we are seeing massive activity in the market, with the stock turnover at around 2 trillion yuan.”
In China's A-share stock market history, liquidity has always been a major driver
At least nine initial public offerings will come to the mainland market today, followed by 21 offerings early next week.
“This would seem to indicate there is new capital entering the market, which is consistent with the increasing interest by retail investors in the stock market,” Alfonso said.
Louis Tse, a director of VC Brokerage , said the strong liquidity in the mainland markets could be due to mainland retail investors buying A-shares on news of the impending inclusion of A-shares in some FTSE indices.
Reuters on Wednesday reported that FTSE Russell, one of the world’s largest index providers, said it would launch two transitional indices that will include A-shares, which could prompt flows of billions of dollars from international funds into Chinese stocks over time.
In Hong Kong, the Hang Seng Index dropped 0.6 per cent or 168.65 points to finish at 28,081.21 points on Wednesday, while the H-share index of mainland Chinese companies listed in the city fell 0.68 per cent, or 100.06 points, to 14,701.88.
The city’s stock market, which is more influenced by international factors, was hurt by a slide in US stocks on Tuesday amid a strong US dollar environment, said Ben Kwong Man-bun, a director of KGI Asia.
On Tuesday, the US dollar rose more than 1 per cent against a basket of major currencies to its highest level since July 2007, while the Dow Jones Industrial Average stock index fell 1.04 per cent for its worst day this month.
Analysts attributed the Dow’s fall to the stronger US dollar and mixed US economic data, which could strengthen the case for a rise in US interest rates this year.
