Southbound trading picking up steam

Transcription

1 Southbound trading picking up steam The Southbound trading link under Shanghai-Hong Kong Stock Connect has progressed steadily since its launch in November It is becoming a key conduit through which Mainland investors are participating in the Hong Kong stock market. In the first four months of 2016, which included 75 Southbound trading days, total turnover and average daily turnover both increased. Total turnover hit HK$ billion in the first four months, with RMB133.1 billion, or per cent, of the Southbound aggregate quota used as of 29 April. The average daily turnover of the link during the period was HK$2.31 billion, accounting for about 3.2 per cent of total Hong Kong stock turnover, up from 1 per cent at launch (Figure 1).

2 Figure 1: Southbound buying and selling as a share of total Hong Kong market turnover (from launch to April 2016). Trend 1: Southbound trading sees net buying With the exception of the third quarter of 2015, the Southbound Trading Link has seen net buying every quarter since launch (Figure 2). There has also been net buying in 64 of the 75 trading days up to the end of April 2016, or 85 per cent of the total number of trading days in the period. Figure 2: Average daily Southbound net buying (from launch to April 2016).

3 Trend 2: Two-way trading balances out as Southbound volumes rise The ratio of Southbound to Northbound monthly turnover rose from 13 per cent at launch to about 50 per cent (Figure 3). In the first four months of 2016, this ratio hit a monthly average of 60 per cent, much higher than the 40 per cent for all of Figure 3: A comparison of Southbound and Northbound trading (from launch to April 2016). Trend 3: Southbound trading patterns change A comparison between 2015 and the first four months of 2016 shows the turnover of Hang Seng large-cap index constituents as a percentage of total Southbound trading volume increased from 27 per cent to 43 per cent, while the percentage of trading in small and medium-cap stocks fell. Finance stocks saw active trading, increasing from 21 per cent to 34 per cent, while trading in consumption-related stocks was stable. The turnover of industrial stocks dropped from 18 per cent to about 7 per cent (Figure 4).

4 Figure 4: Sectors traded by Southbound investors. Trend 4: Hong Kong-listed shares held by Mainland investors through Stock Connect increases substantially By looking at the top ten Hong Kong listed companies with the highest ratio of shares held by Stock Connect Southbound investors to the companies issued share capital or tradable shares at the end of 2014 and 2015, and the first four months of 2016, one can see that average shareholdings under the Southbound link notably increased from 3 per cent at the end of 2014 to 19 per cent at the end of April Southbound investors held as much as per cent of Beijing Jingcheng Machinery Electric (Figure 5). Fig 5: Top 10 companies with highest ratio of shares held by Southbound investors. ()

5 Stocks held by Mainland investors under the Southbound link add up to a considerable market cap, and are concentrated in the finance sector. Among the top ten stocks by market cap held through the Southbound link, the finance sector accounted for 60 per cent, with holdings in HSBC having the highest market cap at HK$12.3 billion (Figure 6), followed by those in ICBC (HK$6.7 billion) and Merchants Bank (HK$3.9 billion). The market cap of stocks held by Southbound investors has been increasing since the launch of Stock Connect. Between the end of 2015 and 29 April 2016, the market cap of shares held by Southbound investors in HSBC and ICBC has almost tripled and doubled respectively, while the market cap of other stocks held under the Southbound link also saw varying degrees of increases. Figure 6: Top five listed stocks by market cap held by Southbound investors The top five stocks by average daily Southbound turnover has changed each year. This year, bank stocks are most popular, as the top four stocks are all banks (Figure 7).

6 Figure 7: Top five stocks by average daily turnover through Southbound trading (from 2014 to the end of April 2016). Appendix 1: Southbound trading (Jan-Apr 2016) Southbound trading (HK$bn) Cumulative buy Cumulative sell Total quota usage (RMB bn) Ratio of total quota usage 53.24% Days of net buy/total 64/75 number of trading days

7 Appendix 2: Top 10 most active stocks under Southbound trading (Jan to Apr 2016) Code Stock ADT Buy Sell Total Percentage of (HKD turnover turnover turnover total m) (HKDbn) (HKDbn) (HKDbn) Southbound trading 5 HSBC % 1398 ICBC % 3968 Merchants % Bank 998 CITIC Bank % 700 Tencent % 1288 Agricultural Bank of % 2318 Ping An Insurance % 1378 Hongqiao % 939 Construction % Bank 861 Digital %

8 Appendix 3: Top 10 companies with highest ratio of shares held by Southbound investors (as of 29 April 2016) Code Stock Ratio of total holdings to tradable shares (%) Total holdings (HKD m) 187 Beijing Jingcheng Machinery Electric Dongfang Electric Guangzhou Baiyunshan Pharmaceutical Holdings Dalian Port Zhengzhou Coal Mining Machinery Group Nanjing Panda Electronics Digital Sichuan Expressway Shenji Group Kunming Machine Tool Luoyang Glass