Tencent, Meituan, HKEX top HK stock losers as southbound connect sees first net selling since mid-December

27-Feb-2021 Intellasia | South China Morning Post | 5:02 AM Print This Post

Mainland Chinese investors pulled their money out of the Hong Kong stock market for the first time in more than two months, after pumping in HK$1.08 trillion (US$139.8 billion) since the start of 2020, hurting some of the most popular bets.

The net selling amounted to HK$20 billion on Wednesday through the Stock Connect’s southbound links, according to Hong Kong stock exchange data, also a daily record. These were the first net outflows since HK$855.6 million of withdrawal was recorded on December 18.

Investors, however, returned with HK$1.7 billion worth of net buying on Thursday, although the purchases remained selective.

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The selling may persist in the short term, after a government decision to raise the stamp duty on stock transactions for the first time since 1993 in its 2021/22 Budget plans. The increase is said to have contributed to the slump in bourse operator Hong Kong Exchanges and Clearing, and the Hang Seng Index’s steepest one-day slide since May.

“Many mainlanders have locked in profits due to the news on higher stamp duty,” said Gordon Tsui, chair of Hong Kong Securities Association. “This will become a trend for at least a few days or a short period of time. Mainland funds or individual investors may shift to other markets [with cheaper costs] to trade the Chinese stocks.”

The proposed increase in stamp duty is a “warning sign”, analysts at Jefferies said in a report on Wednesday. It could be viewed as a sign that the government aims to curb the surge in inflows to the Hong Kong stock market, just as China did to adjust its onshore markets, they said.

Tencent Holdings, the biggest recipient of southbound inflows, was also the biggest loser on Wednesday as investors took HK$4.92 billion off the table, according to stock exchange data. Meituan and HKEX made up the top three sell-offs. This may be instructive for trading as sentiment and capital flow swings.

The trio completed the day with contrasting outcomes. Tencent rebounded 0.7 per cent to HK$691.50, paring a rally to as high as HK$717. Meituan rose 1.3 per cent to HK$370.40 while HKEX slumped again with a 1.8 per cent setback to HK$500. The latter two suffered net selling again on Thursday.

In summary, six stocks also suffered combined net outflows based on the most active stocks on both Shanghai and Shenzhen southbound connections on Wednesday. Three others saw net selling in one of the two cross-border trading links.

The increase in stamp duty will lift overall trading costs by 8 per cent, according to a Shanghai Securities News report, which cited an analysis by Zhongtai Financial International. In the long run, however, the hike will not have a big impact as profitability, valuation and outlook remain as key factors in attracting investors, it said.



Category: Hong Kong

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