HK Shares End Up At Record On China Rule Change
HONG KONG (Dow Jones)--Hong Kong shares rose sharply to a record close Monday, boosted mainly by China-related companies, after Beijing said it will allow approved mainland banks to invest in overseas stocks and structured equity products. The benchmark Hang Seng Index ended up 511.03 points, or 2.5%, at 20,979.24, after trading between 20,870.01 and 21,065.59. The H-share index rose 5.4% to end at record 10,948.72 on expectations the mainland China funds will invest heavily in H shares. Turnover was also a record at HK$94.99 billion, up from HK$60.69 billion Friday. Traders said the change to China's Qualified Domestic Institutional Investment program provides more of a psychological boost to Hong Kong equities, as the initial investment amount will likely be insignificant. Previously, Chinese banks were limited to investing client funds only in fixed-income products overseas under the program. 'Still, this potentially could be long-term positive if the measure proves successful in diverting excess liquidity in China and helps cool investment fever in the A-share market,' said Y.K. Chan, a fund manager at Phillip Asset Management. 'Also, QDII quotas may continue to grow in the future, channeling a massive amount of mainland funds to Hong Kong,' he said.
Steven Leung, director of institutional sales at UOB Kay Hian (Hong Kong) Ltd. said “while the upward momentum could be sustained in the next three to five trading sessions, profit-taking could emerge after investors digest the news”. He estimated the Hang Seng Index would remain around 21,000 in the near term. Credit Suisse Group said in a research report Monday it expects overseas companies familiar to Chinese investors and prominent Chinese companies not listed in the A-share market to benefit most from the change to the QDII program. Such companies include China's largest life insurer by premiums, China Life, which ended up 5.9% at HK$26.05, another, heavyweight HSBC, rose 1.3% to HK$146.90 and China Mobile gained 3.9% to HK$73.75.
