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SHANGHAI, April 8 (Reuters) - Chinese investors, for the first time, on Wednesday used the entire 10.5 billion yuan ($1.69 billion) daily investment quota granted for buying Hong Kong stocks under the Hong Kong-Shanghai Stock Connect scheme.
The buying boosted the Hang Seng Index, which soared more than 3.7 percent. the Hang Seng China Enterprises Index of Hong Kong-listed mainland companies was up 5.7 percent for the day.
The milestone follows signs of rapidly rising interest in Hong Kong stocks from mainland investors, after months of tepid interest that caused the southbound leg of the stock connector to go largely unused.
Chen Zhizhong, a Shenzhen-based analyst at China Merchant Securities, said that the recent three-day weekend was full of discussion in the analyst community about whether the time was right to move into Hong Kong.
The consensus answer, apparently, was yes.
“The party has begun, and you can feel the excitement today,” Chen said. “It’s hard to say when the music will stop.”
Over the past year, China’s CSI300 index has soared more than 90 percent, while the Hong Kong China Enterprises Index rose just 28 percent.
The divergent performance caused the index measuring the price difference for dual-listed firms, commonly known as the “A-share premium”, to shoot upward to a multi-year high of 135 on March 24, implying that Shanghai shares were trading at one-third premium to shares in the same company listed in Hong Kong.
It has since plummeted sharply as southbound flows have increased in recent days, now hovering around 124.
Analysts say part of the reason for the increased southbound flows is that Chinese regulators last week allowed mutual funds to buy Hong Kong shares under the Connect program, see as making it easier to get around previous barriers to southbound flows, including high capital thresholds and lengthy application requirements.
$1 = 6.2059 Chinese yuan Reporting by Samuel Shen and Pete Sweeney; Editing by Kim Coghill and Richard Borsuk