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Money flows to Shanghai as landmark bonds couple with Hong Kong opens

SHANGHAI/HONG KONG (Reuters) – International buyers snapped adult Chinese bonds on Monday during a entrance of an sell couple that allows Hong Kong and Shanghai investors to trade shares on any other’s bourses, a vital step towards opening China’s firmly tranquil collateral markets.

The supposed Stock Connect intrigue gives unfamiliar and Chinese sell investors rare entrance to a dual exchanges, that some analysts pronounced could eventually lead to a origination of a world’s third largest batch exchange.

Northbound trade – investors with Hong Kong accounts shopping mainland shares – distant outstripped trade from mainland investors in a conflicting direction, with a daily extent for shopping Shanghai bonds underneath a intrigue tired by mid-afternoon.

But there was no postulated first-day rebound in prices – benchmark mainland and Hong Kong indexes non-stop some-more than 1 percent aloft though shortly sagged to tighten reduce on a day.

The run-up to a launch saw a clever marketplace rally, partly on expectations of an boost in account flows from a scheme, withdrawal investors discreet of chasing bonds any higher, pronounced Zheng Weigang, comparison merchant during Shanghai Securities.

“In a longer run, however, a bond will certainly advantage both markets as China increasingly opens adult to a outward world,” Zheng added. “Particularly, a bond will assistance pull a mainland’s prevalent suppositional batch enlightenment towards a some-more investment-oriented market.”

The CSI300 index .CSI300 of tip Chinese shares sealed down 0.5 percent while a Shanghai Composite Index .SSEC fell 0.2 percent. The Hang Seng Index .HSI in Hong Kong finished down 1.2 percent.


Analysts had approaching most of a initial money upsurge to be northbound, with unfamiliar investors on a Hong Kong Exchange (0388.HK) means to collectively buy adult to a daily share of 13 billion yuan ($2.12 billion) of mainland stocks.

The approaching account influx had helped pull a SSE180 Index .SSE180 and a SSE380 Index .SSE380I – a dual categorical Chinese destinations for unfamiliar investment by a intrigue – adult some-more than 10 percent and 6.5 percent given late final month.

Southbound investment, capped by a daily share of 10.5 billion yuan, is approaching to be reduction active.

All a daily northbound share was used by mid-afternoon, though only 17 percent of a southbound share had been taken by a marketplace close.

The launch of a batch couple scheme, also dubbed a “Through Train”, comes as Beijing stairs adult a financial marketplace liberalisation efforts this year.

It has determined offshore yuan centres from Sydney to London, sealed barter lines with countries in a Middle East and has authorised unfamiliar companies in China to pierce renminbi opposite borders with larger leisure than ever before.

But it also comes as a time when concerns over a world’s second biggest economy are mounting. Underscoring such worries, Chinese banks’ bad loan ratio rose to 1.16 percent during a finish of September, adult 0.09 percent points from June, a banking regulator pronounced on Saturday.

“It took a longer-than-expected duration of time for such a tiny daily share to be used, indicating altogether view in Shanghai stays cautious,” pronounced Zhang Gang, comparison researcher during Central Securities in Shanghai.


Turnover in both markets were roughly in line with daily numbers. Over a longer term, however, a batch bond could boost a normal daily value of batch trade in Hong Kong by about 38 percent by 2015, French bank BNP Paribas estimates.

“Chinese investors will take Hong Kong as a place to put their long-term bets. So that’s since we consider in a long-run Hong Kong will advantage from this,” pronounced Alex Wong, item government executive during Ample Finance Group in Hong Kong.

For Shanghai, it is poignant since it will concede unfamiliar investors to get some-more actively concerned in China’s collateral market, he added.

China already operates several cross-border investment schemes, though these are limited to specific firms that contingency request for a looseness to participate.

The Stock Connect programme was creatively approaching to launch on Oct. 27, though that unaccepted deadline passed, heading to conjecture that a programme competence be hold adult by technical or domestic hurdles.

The incompatible taxation manners requesting in Hong Kong and a mainland were also a vital stumbling block, though China’s Finance Ministry pronounced on Friday that it would temporarily free taxes on increase done from a Connect scheme.

Hong Kong’s personality CY Leung has hinted that a ongoing pro-democracy protests in a city had also played a purpose in a delay.

(Additional stating by Lu Jianxin in SHANGHAI, Yimou Lee in HONG KONG and Shanghai newsroom; Editing by Will Waterman and Alex Richardson)

Article source: http://www.reuters.com/article/2014/11/17/us-hongkong-china-stocks-idUSKCN0J00Z820141117

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