Business / Markets

Prudence as historic Shanghai-HK stock link opens

(Xinhua) Updated: 2014-11-18 14:13

SHANGHAI/HONG KONG - Investors reacted to the official opening of the historic Shanghai-Hong Kong stock connect with a mixture of enthusiasm and prudence on Monday.

The daily northbound trading quota of 13 billion yuan ($2.12 billion) was reached at 13:57 pm local time, hours after trading of Shanghai shares via Hong Kong opened to all Hong Kong and overseas investors on the first day.

At a bourse in Hong Kong, a man who declined to be named said he had just used the new trading program for the first time. "I bought a few (A-shares), and will keep trying," he said. "My goal is that in the future, 70 percent of my capital will be in Chinese mainland."

However, Hong Kong strategy investment adviser director Daniel Chan said currently investors in Hong Kong are mainly companies and organizations. "Private investors are not familiar with the equity market in the mainland, its rules and the shares," he said.

Some clients called to ask about the program, but most still prefer trading local shares, he said.

"How could one buy a cow from the other side of a mountain that they are not familiar with? " Chan said.

His reluctance was shared by another middle-aged female investor, who refused to be named.

"You need renminbi to buy the A-share," she complained. "Now that the exchange rate is so high, I'd better focus on local stocks."

Still she was interested in the program, asking investors questions regarding the quota and regulations.

"This is only a beginning," said an optimistic Ma Huiming, general manager of the China Investment Securities (HK). "The market is to be fostered and investors are to be taught," he said. "The market will be really popular in two years."

People in Shanghai showed even more prudence, partially because of a threshold as trading of Hong Kong shares via Shanghai is only open to mainland institutions and individuals with at least 500,000 yuan ($81,579) in their trading account.

The benchmark Shanghai Composite Index dropped 0.19 percent to finish at 2,474.01 points. The Shenzhen Component Index closed at 8,283.8 points, down 0.52 percent.

Xinhua interviewed several individual investors, but none had bought Hong Kong shares.

One investor, surnamed Han, said she invested less than 20,000 yuan in the stock market. "It is too risky," she said. But the new trading plan gave her some inspiration.

"I will follow the Hong Kong investors and see which shares they chose to buy," she said.

She also hoped that investors from the mainland can learn from their counterparts in Hong Kong on how to play the stock market sensibly.

Yang Huaiding, a Shanghai pioneer in the capital market nicknamed "Millionaire Yang", who earned a fortune in the stock market, also believes its an opportunity for mainland investors to learn.

"After the Shanghai-Hong Kong stock link opens, perception in the stock market in the mainland will change," he said. "Many people now take a speculative attitude and like to follow suit. Prices of some shares which are not so good are often pushed up."

With more capital flooding in, he said people's "psychological bubbles" are bound to burst.

Han, the investor in Shanghai, also hoped that the program could help beef up the stock market in the mainland.

The program will bring about "the biggest rebalance of capital in the world," Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said. He estimated that it will push the assets in mainland's banks to flow to capital market, so that the volume of A-share market will grow tremendously in five to ten years.

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