China in focus as HK-Shanghai link debuts

Chinese stocks will be under the spotlight as the long awaited stock exchange link between Hong Kong and Shanghai launches today.

Hong Kong business district
Source: Bloomberg

Dubbed the ‘through train’, the exchange link will allow foreign investors unprecedented access to China's US$4.2 trillion equity market - creating the second-largest bourse in the world. 

Conversely, the link will give mainland retail investors a chance to go shopping on the Hong Kong exchange for the first time.

Interest has been building up ahead of the event, with the Hang Seng China AH Premium Index up at 101.56, which is 8% higher since April when plans for the link were announced by Chinese premier Li Keqiang.

This is the highest reading by the index in over a year and indicates the premium that mainland dual-listed shares are trading relative to their Hong Kong counterparts.

Amid the air of optimism, there are expectations for huge fund flows to the Chinese markets. In in interim at least, this should provide a lift for Chinese indices such as China A50, China H-Shares, and the Hong Kong HS50.

The success of this link could see similar set ups such as a bridge between Hong Kong and China’s second largest stock market in Shenzhen, or potentially even a link to Singapore.

Ahead of the Hong Kong open

We are likely to see Hong Kong stocks build on the momentum of their five-day winning streak. The Hang Seng Index gained 2.28% over the past week, closing at 24,087.38 points. This sees it holding above the 24,000 point level for the first time in nearly two months.

There is slight bullish bias with 79% of the index constituents above their 20D MA (vs 72% the previous session) and 65% of the shares are above their 50D MA (vs 63%). On that basis, we are calling for the Hong Kong HS50 to open 2.36% higher at 24,650.30 points.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.