A long-delayed trading link between the exchanges of Hong Kong and Shenzhen made a disappointing debut yesterday, with markets on both sides of the border ending lower.
The link opens another door to China’s cloistered markets, allowing foreigners to buy shares in more than 800 Chinese firms for the first time, while also giving Chinese further access to Hong Kong-listed companies.
Similar to a connect that started between Hong Kong and Shanghai two years ago, the scheme is being touted as China’s latest effort to prove its capital markets are gradually opening.
Photo: Bloomberg
However, a growth slowdown in China’s economy, the weak yuan and an expected hike in US interest rates have analysts sounding a note of caution.
Hong Kong Chief Executive Leung Chun-ying (梁振英) hailed it as “yet another milestone in deepening mutual access” between the capital markets in Hong Kong and China.
Hong Kong remains connected to the global financial system, unlike China’s closed markets.
However, by the close Hong Kong was down 0.26 percent and Shenzhen’s composite index had given up 0.78 percent.
Only 21 percent of the northbound trade permitted under the scheme was taken up, while a little more than eight percent of the southbound quota was used up.
Hong Kong-based analyst Jackson Wong (黃志陽) said the lackluster start was not a surprise.
“Investors were not expecting a spectacular open anyway, because investor sentiment is a little bit on the quiet side,” he said.
That was mainly due to the weak yuan and concern that China would not open up capital flows in the short term, said Wong, a securities analyst at Huarong International.
The markets’ performance might improve once the currency stabilizes, he said, adding: “I think [China] will roll out more relaxed policies and that would eventually trigger ... more buying interests.”
Analysts said the repercussions of a rout last year in Chinese markets — which spread globally — were still being felt.
That delayed the launch of the new link, which had been expected by the end of last year. Concerns have been exacerbated more recently by capital flight caused by the weakening yuan, which is at eight-year lows against the US dollar.
Comments from China Securities Regulatory Commission Chairman Liu Shiyu (劉士餘) might also have dented sentiment, analysts said.
Liu blasted hostile corporate takeover attempts between Chinese firms in a strongly worded speech posted on the commission’s Web site.
In the highest-profile case, China’s largest property firm, China Vanke Co (萬科), has been fighting to repel an acquisition by private conglomerate Baoneng Group (寶能集團) that would be China’s first blue-chip hostile takeover.
While saying some buyouts can be positive, Liu condemned those in which the suitor becomes “a barbarian, and then eventually a bandit.”
He did not spell out any official measures to stem such takeovers.
“The [market] drop is mainly related to [Liu’s] speech rather than the stock trading link launch,” said Zhang Yufa, research director for private equity firm Million Tons Capital. “Market sentiment was affected by this.”
Shenzhen is China’s second stock exchange, behind Shanghai, and is the world’s eighth largest bourse with a market capitalization of US$3.3 trillion as of September.
The Shanghai-Hong Kong link launched in November 2014, giving foreigners access for the first time to Chinese companies not quoted elsewhere, and vice versa.
However, it has failed to excite traders, with both daily quotas for southbound Chinese and northbound international buyers often unfilled.
Chinese trading accounts are valid for both the Shanghai and Shenzhen exchanges, so the latest link does not give access to the Hong Kong bourse to any extra investors.
However, it would allow the existing ones to trade another 101 smaller Hong Kong-listed companies.
Neil Mclean of brokerage Instinet said the long-term significance of the stock connect should not be underestimated.
“The real huge significance of this over a 10-year scope is the ability for China to come in to the rest of the world,” said Mclean, head of execution trading for Asia ex-Japan. “China doesn’t open its doors for fun.”
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last