China's stock market has been going crazy lately - people were calling a bubble months ago and it still rises due to the constant influx of money from new household investors who are constrained to this one small market.
Apparently they are now going to allow some of that money to go into China's Hong Kong stock market (H shares).
Snippet:
"It's one of the ways to provide some cooling to the local market because so much liquidity has been trapped within the system with no outlet,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``In terms of the outlook for Hong Kong's market, that's going to be attractive.''
The Hang Seng Index surged 5.9 percent, the biggest advance since Oct. 16, 1998. The Hang Seng China Enterprises Index of mainland companies soared 8.7 percent, the biggest one-day gain in more than seven years.
Mainland Chinese companies listed in Hong Kong, known as H shares, trade at an average of 21 times earnings. That's less than half the 50 times multiple for the benchmark CSI 300 Index of stocks listed in Shanghai and Shenzhen. The Hang Seng Index trades on a price-earnings ratio of 15. "
See full story below:
So my question is how best to get exposure to these H shares? Any Managed funds or LIC's that have specific focus on this market?
China Lets Individuals Buy Hong Kong Stocks in Trial (Update5)
By Li Yanping and Christina Soon
Aug. 20 (Bloomberg) -- China's currency regulator said it will let individuals buy Hong Kong stocks for the first time, helping send the city's benchmark Hang Seng Index to its biggest gain in almost nine years.
Chinese citizens with a Bank of China Ltd. account in the northern city of Tianjin will be allowed to invest foreign currencies under a pilot program, the State Administration of Foreign Exchange said today. The regulator didn't specify an investment maximum or say when the trial will start.
Hong Kong stocks extended a rally after the announcement on speculation more of China's 17 trillion yuan ($2.2 trillion) in household savings will enter the market. China is letting more capital flow offshore to curb growth in its record $1.33 trillion foreign-exchange reserves, which have flooded the economy with cash and put pressure on the yuan to appreciate.
``It's one of the ways to provide some cooling to the local market because so much liquidity has been trapped within the system with no outlet,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``In terms of the outlook for Hong Kong's market, that's going to be attractive.''
The Hang Seng Index surged 5.9 percent, the biggest advance since Oct. 16, 1998. The Hang Seng China Enterprises Index of mainland companies soared 8.7 percent, the biggest one-day gain in more than seven years.
Mainland Chinese companies listed in Hong Kong, known as H shares, trade at an average of 21 times earnings. That's less than half the 50 times multiple for the benchmark CSI 300 Index of stocks listed in Shanghai and Shenzhen. The Hang Seng Index trades on a price-earnings ratio of 15.
Capital Controls
Restrictions on the renminbi, as the Chinese currency is called, mean individuals are barred from investing overseas. The government is loosening controls as record trade surpluses drive up the foreign-exchange reserves and complicate efforts to cool the world's fastest-growing major economy.
China allowed selected banks and brokerages to start investing overseas starting last year under a so-called qualified domestic institutional investor, or QDII, program.
Individual investors need to open a foreign-exchange account at Bank of China's branch in Tianjin's Binhai area, earmarked as a new center for financial innovation. They won't be subject to a rule that limits foreign-exchange purchases to $50,000 annually, the regulator said on its Web site.
Enhanced Status
The trial program is ``a clear demonstration of the mutually assisting, complementary and interactive relationship between the financial systems of the mainland and Hong Kong,'' the city's financial secretary John Tsang said in a statement on the government's Web site. ``It will help enhance the status of Hong Kong as an international financial center.''
Allowing Chinese investors to buy Hong Kong stocks may help cool the domestic stock market. The CSI 300 has surged 139 percent this year after more than doubling in 2006, drawing warnings of a possible bubble. Investors have opened 33 million brokerage accounts this year, six times the total for 2006.
``The initial impact will be limited, as the domestic stock market is doing so well and people are reluctant to invest outside,'' said Wu Kan, an analyst at Shanghai Securities Consulting Co. in Shanghai. ``But when the market turns bearish one day, it will trigger capital flight.''
Bolstering Returns
The changes aim to boost returns on individuals' foreign- exchange holdings, broaden channels for currency outflows and improve China's international balance of payments, the regulator said. Investors can keep returns from investments in foreign currencies or convert back to renminbi, it said.
The transactions can only be done between Bank of China's account in Binhai and BOC International Holdings Ltd. in Hong Kong to prevent funds from going elsewhere or becoming so-called hot money within China, according to the statement.
Bank of China's H shares jumped 10.9 percent in Hong Kong to HK$3.77, while the bank's yuan-denominated A shares rose 5.9 percent to 6.10 yuan in Shanghai. BOC International's shares aren't publicly traded.
Investors in Hong Kong stocks are banned from short- selling, according to a separate statement on the currency regulator's Web site today giving details of the new policy.
Hong Kong's Role
Hong Kong Exchanges and Clearing Ltd. welcomed the decision and said it would help ``narrow the price gap between the Hong Kong-listed H shares'' and mainland-traded stocks.
``The impact of Chinese money in the Hong Kong market could increase dramatically,'' Vincent Chan, Beijing-based head of China region research at Credit Suisse Group, wrote in a research report. While the impact of the change is difficult to assess, it will ``fundamentally change the dynamics of the Hong Kong market if this policy is adopted fully.''
China has used Hong Kong as a test ground for financial innovations, allowing the city's banks to offer yuan services and Chinese companies to sell yuan-denominated bonds there. Hong Kong, a former British colony that returned to Chinese sovereignty in 1997, retains its own currency, legal system and passport controls.
``There's potential for 60 million-plus retail investors to start plowing their money into Hong Kong,'' said Andrew Clarke, a sales trader at SG Securities Hong Kong Ltd. ``It won't happen anytime soon but it will come.''
Apparently they are now going to allow some of that money to go into China's Hong Kong stock market (H shares).
Snippet:
"It's one of the ways to provide some cooling to the local market because so much liquidity has been trapped within the system with no outlet,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``In terms of the outlook for Hong Kong's market, that's going to be attractive.''
The Hang Seng Index surged 5.9 percent, the biggest advance since Oct. 16, 1998. The Hang Seng China Enterprises Index of mainland companies soared 8.7 percent, the biggest one-day gain in more than seven years.
Mainland Chinese companies listed in Hong Kong, known as H shares, trade at an average of 21 times earnings. That's less than half the 50 times multiple for the benchmark CSI 300 Index of stocks listed in Shanghai and Shenzhen. The Hang Seng Index trades on a price-earnings ratio of 15. "
See full story below:
So my question is how best to get exposure to these H shares? Any Managed funds or LIC's that have specific focus on this market?
China Lets Individuals Buy Hong Kong Stocks in Trial (Update5)
By Li Yanping and Christina Soon
Aug. 20 (Bloomberg) -- China's currency regulator said it will let individuals buy Hong Kong stocks for the first time, helping send the city's benchmark Hang Seng Index to its biggest gain in almost nine years.
Chinese citizens with a Bank of China Ltd. account in the northern city of Tianjin will be allowed to invest foreign currencies under a pilot program, the State Administration of Foreign Exchange said today. The regulator didn't specify an investment maximum or say when the trial will start.
Hong Kong stocks extended a rally after the announcement on speculation more of China's 17 trillion yuan ($2.2 trillion) in household savings will enter the market. China is letting more capital flow offshore to curb growth in its record $1.33 trillion foreign-exchange reserves, which have flooded the economy with cash and put pressure on the yuan to appreciate.
``It's one of the ways to provide some cooling to the local market because so much liquidity has been trapped within the system with no outlet,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``In terms of the outlook for Hong Kong's market, that's going to be attractive.''
The Hang Seng Index surged 5.9 percent, the biggest advance since Oct. 16, 1998. The Hang Seng China Enterprises Index of mainland companies soared 8.7 percent, the biggest one-day gain in more than seven years.
Mainland Chinese companies listed in Hong Kong, known as H shares, trade at an average of 21 times earnings. That's less than half the 50 times multiple for the benchmark CSI 300 Index of stocks listed in Shanghai and Shenzhen. The Hang Seng Index trades on a price-earnings ratio of 15.
Capital Controls
Restrictions on the renminbi, as the Chinese currency is called, mean individuals are barred from investing overseas. The government is loosening controls as record trade surpluses drive up the foreign-exchange reserves and complicate efforts to cool the world's fastest-growing major economy.
China allowed selected banks and brokerages to start investing overseas starting last year under a so-called qualified domestic institutional investor, or QDII, program.
Individual investors need to open a foreign-exchange account at Bank of China's branch in Tianjin's Binhai area, earmarked as a new center for financial innovation. They won't be subject to a rule that limits foreign-exchange purchases to $50,000 annually, the regulator said on its Web site.
Enhanced Status
The trial program is ``a clear demonstration of the mutually assisting, complementary and interactive relationship between the financial systems of the mainland and Hong Kong,'' the city's financial secretary John Tsang said in a statement on the government's Web site. ``It will help enhance the status of Hong Kong as an international financial center.''
Allowing Chinese investors to buy Hong Kong stocks may help cool the domestic stock market. The CSI 300 has surged 139 percent this year after more than doubling in 2006, drawing warnings of a possible bubble. Investors have opened 33 million brokerage accounts this year, six times the total for 2006.
``The initial impact will be limited, as the domestic stock market is doing so well and people are reluctant to invest outside,'' said Wu Kan, an analyst at Shanghai Securities Consulting Co. in Shanghai. ``But when the market turns bearish one day, it will trigger capital flight.''
Bolstering Returns
The changes aim to boost returns on individuals' foreign- exchange holdings, broaden channels for currency outflows and improve China's international balance of payments, the regulator said. Investors can keep returns from investments in foreign currencies or convert back to renminbi, it said.
The transactions can only be done between Bank of China's account in Binhai and BOC International Holdings Ltd. in Hong Kong to prevent funds from going elsewhere or becoming so-called hot money within China, according to the statement.
Bank of China's H shares jumped 10.9 percent in Hong Kong to HK$3.77, while the bank's yuan-denominated A shares rose 5.9 percent to 6.10 yuan in Shanghai. BOC International's shares aren't publicly traded.
Investors in Hong Kong stocks are banned from short- selling, according to a separate statement on the currency regulator's Web site today giving details of the new policy.
Hong Kong's Role
Hong Kong Exchanges and Clearing Ltd. welcomed the decision and said it would help ``narrow the price gap between the Hong Kong-listed H shares'' and mainland-traded stocks.
``The impact of Chinese money in the Hong Kong market could increase dramatically,'' Vincent Chan, Beijing-based head of China region research at Credit Suisse Group, wrote in a research report. While the impact of the change is difficult to assess, it will ``fundamentally change the dynamics of the Hong Kong market if this policy is adopted fully.''
China has used Hong Kong as a test ground for financial innovations, allowing the city's banks to offer yuan services and Chinese companies to sell yuan-denominated bonds there. Hong Kong, a former British colony that returned to Chinese sovereignty in 1997, retains its own currency, legal system and passport controls.
``There's potential for 60 million-plus retail investors to start plowing their money into Hong Kong,'' said Andrew Clarke, a sales trader at SG Securities Hong Kong Ltd. ``It won't happen anytime soon but it will come.''
