The Shanghai-Hong Kong stock connection scheme is likely to accelerate fund outflows from the local bourse to Chinese shares that may eventually climb higher, analysts said yesterday.
The connection scheme is expected to go into practice later this month and Chinese authorities are due to promulgate implementation details within the next two weeks.
Foreign investors cut local shares by an extra net NT$4.46 billion (US$146.55 million) yesterday, after pulling net NT$63.1 billion out of Taiwan as of Friday last week, Taiwan Stock Exchange data showed.
Stock trading amounted to NT$100.23 billion yesterday, higher than the average of NT$80 billion a day earlier, but still lower than the NT$115 billion turnover that is favored by the Financial Supervisory Commission (FSC).
The TAIEX closed nearly flat at 8966.92 yesterday, after weakening 4.97 percent last month.
By contrast, Chinese shares have gained 16.57 percent since July and are set to fare stronger on the back of the connection policy and improved economic fundamentals, HSBC Global Asset Management Taiwan said yesterday.
The stock connection could create a splash across Greater China as it allows investors more room to diversify asset allocation, and many hope the scheme extends to Taiwan and Singapore, HSBC said.
That might not happen in Taiwan any time soon, as the nation’s top financial regulator recently said it needs some time to assess the impact of the connection program.
The FSC acknowledged concerns over drastic fund flight to Hong Kong and China, but said it has yet to to detect abnormal fund movements so far. The commission would adopt measures to boost the local stock market if trading remains light this week, FSC Chairman William Tseng (曾銘宗) said.
Taiwanese investors, professional and individual, cannot purchase Chinese or Hong Kong shares directly, but have to do so via sub-brokerage.
Chinese shares could grow 6.22 percent or more in the fourth quarter, aided by the stock connection scheme, First Securities Investment Trust Co (第一金投信) said, adding that chances of turning profits from investment in Chinese shares are about 60 percent.
“The advent of the new stock connection program bodes well for Chinese shares,” the fund house said.
Taiwanese shares could hover at about the 9,000-point mark in the coming three months now that the FSC has pledged to introduce stimulus measures if necessary, Manulife Asset Management Co (宏利投信) said.
The TAIEX could fluctuate between 8,800 and 9,200 this quarter, as the US Federal Reserve is to end its monetary easing policy, driving global funds to the US market to take advantage of interest rate hikes, the fund house said.
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