Mainland Chinese investors have set a new record for stock purchases in Hong Kong, significantly increasing their exposure to the city’s risk assets as optimism rises and the yuan weakens. Data compiled by Bloomberg reveals that traders from Shanghai and Shenzhen acquired a total of HK$778 billion (approximately $100 billion) in Hong Kong stocks through December 20, marking the highest annual figure since the inception of trading links with the financial hub in 2016.
Among the most sought-after stocks were shares in major companies like Alibaba Group Holding Ltd., Bank of China Ltd., and China Mobile Ltd. This surge in investment has been driven by a number of factors, including a series of economic stimulus measures by Beijing, which helped buoy Hong Kong’s benchmark indices. Additionally, the depreciating yuan has fueled demand for dollar-denominated assets, further encouraging mainland investors to shift capital into Hong Kong’s equity markets.
Zeng Wenkai, Managing Director at Shengqi Asset Management Co., noted that onshore investors increased their share of Hong Kong’s market trading to a record 45% in the fourth quarter. However, he cautioned that while this influx of capital is significant, the future performance of Hong Kong’s market will depend on the balance between continued demand from mainland investors and potential outflows from global funds.
Despite the strong buying momentum, Zeng believes that Chinese investors are unlikely to become the dominant holders of Hong Kong equities in the short term. Since the launch of the trading link, mainland investors have purchased a cumulative total of HK$3.3 trillion in Hong Kong stocks.
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