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General view of Hong Kong Exchange Square in Central. Photo: Jelly Tse.
BusinessBanking & Finance

Hong Kong stocks soar after China’s market regulator vows support for city’s global financial hub status

  • The China Securities Regulatory Commission will facilitate Hong Kong listings by leading Chinese firms and expand the Stock Connect cross-border investment scheme
  • The market regulator said ‘it is necessary to consolidate and enhance Hong Kong’s status as an international financial centre’
Banking & finance
SCMP Reporter
SCMP Reporter
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Hong Kong stocks rallied after China’s market regulator unveiled a series of market reforms aimed at enhancing the city’s status as a financial hub, with sentiment also getting a boost from the prospect of a bigger investor base following the changes.

The Hang Seng Index rose 1.8 per cent on Monday to close at 16,511.69. The Tech Index gained an identical 1.8 per cent, while the Shanghai Composite Index fell 0.7 per cent.

Among the most heavily traded stocks were Hong Kong Exchanges and Clearing, the stock exchange operator, which rose as much as 3.7 per cent but gave up some gains to end the day at HK$220, still up 2.5 per cent on the day. Topping the volumes list were gaming giant Tencent, which jumped 5.3 per cent to HK$320 and food delivery company Meituan which advanced 5.6 per cent to HK$100.60. E-commerce behemoth Alibaba was up 2.5 per cent at HK$68.35.
Prominent among losers was Li Auto, which dived as much as 9.7 per cent, but recouped some of that to close at HK$97.45, down 8.3 per cent for the day after a discount war spread to the premium segment in the world’s biggest electric vehicle market.

Oil stocks slumped after crude prices retreated on the build-up in US inventories and a cooling of Middle East tensions. Offshore oil and gas major CNOOC fell 2.5 per cent to HK$18.16 and PetroChina, Asia’s largest oil and gas producer, slumped 2.7 per cent to HK$7.29.

The China Securities Regulatory Commission announced late on Friday that it will facilitate Hong Kong listings by leading Chinese companies and said it will expand the Stock Connect cross-border investment scheme to enhance the city’s status as an international financial centre.
The measures follow recent moves by the market regulator to raise the bar for new listings and strengthen delisting regulations.

“The earlier changes made by the CSRC seek to make qualitative improvements,” said Nitin Dialdas, chief investment officer at Mandarin Capital Ventures. “The messaging is geared towards reversing the foreign investment outflows and lifting investor confidence”

Foreign investment flows into China fell 26.1 per cent in the January-March period, data from the Chinese commerce ministry showed on Friday. The market regulator said it aims to promote the coordinated development of the capital markets of the mainland and Hong Kong.

“The central government fully supports Hong Kong’s long-term maintenance of its unique status and advantages,” the CSRC said in an announcement after markets shut on Friday, reiterating President Xi Jinping’s message that “it is necessary to consolidate and enhance Hong Kong’s status as an international financial centre”.

A Chinese national flag flutters outside the China Securities Regulatory Commission (CSRC) building on the Financial Street in Beijing, China July 9, 2021. Photo: Reuters

Edith Qian, equity strategist at CGS International Securities, said these efforts “should widen the investor base, encourage incremental fund inflow to the Hong Kong stock market, and further enhance stock liquidity”.

“Nevertheless, we still see ample room for further enhancing the scheme, such as introducing block trading, allowing for IPO subscriptions, and including secondary listed stocks,” she said in a report.

The People’s Bank of China (PBOC) kept the 1-year and 5-year loan prime rates (LPR) unchanged at 3.45 per cent and 3.95 per cent respectively on Monday. Analysts had expected this decision after the stronger-than-expected first-quarter economic data and given the priority given to currency stabilisation.

Asian markets were broadly higher. Japan’s Nikkei 225 Index rose 1 per cent, Korea’s Kospi advanced 1.5 per cent while Australia’s S&P/ASX 200 climbed 1.1 per cent.

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