SHANGHAI (Reuters) – As China’s blue-chip index approaches record highs, growing fears of developing bubbles in some parts of the country’s stock market are driving it some investors seek bargains in Hong Kong.
Retail investors have poured money into stocks through mutual currencies, pushing valuations in sectors such as consumer, healthcare and new energy to multi-year levels or even higher.
For example, the CSI ‘s new energy index has risen 15% so far this year, after more than doubling in 2020, thanks in part to China’ s carbon neutrality promise.
(Graphic: China’s new energy, healthcare and new consumer stocks are driving benefits as the country’s blue-chip index approaches near a high level,) (Graphic: Evaluation of China’s stock market distribution ,)
“There is a huge bubble in consumer, healthcare and alcohol stocks, with the valuations of some of these shares higher than their previous highs,” said Dong Baozhen, chairman of securities fund private based in Beijing Lingtong Shengtai Investment Management.
“Their rally has nothing to do with foundations now and it is a huge risk for investors,” he said.
In the latest example of a sales frenzy, a Chinese mutual fund drew $ 37 billion worth of investment subscriptions on the first day of a sale.
(Graphic: Mutual property industry in China is growing rapidly,)
The rise in stock prices has been fueled by foreign and domestic currencies, as Chinese authorities have given strong impetus to deal with the blow from the COVID-19 pandemic and the country’s economy has recovered more quickly than others.
As concerns mount about frothy valuations, some investors are turning to cheaper Chinese shares listed in Hong Kong, especially as U.S. exchanges offer the those companies and American investors are forcing them to download their shares.
“The (US) ban is really telling people what good funds Hong Kong is,” said Xia Tian, managing director of the Shanghai Minvest-based asset management company.
Investor purchases through Stock Connect from the mainland to Hong Kong hit a record high of HK $ 26.6 billion ($ 3.43 billion) on Tuesday, while purchases to the south in the new year hit HK $ 221.8 billion as of Thursday, according to data exchange.
The Stock Link scheme allows investors access to both markets when investing in mainland A shares and Hong Kong H-shares.
Morgan Stanley believes the strong inflows into Hong Kong are due to the encouragement of mainland policymakers for inward investment and the high price of domestic A shares over the listed H-shares. in Hong Kong. Shares A of listed companies in China currently trade at a price higher than 30% over their shares on the Hong Kong listed.
(Graphic: Mainland investors hunt bargains in Hong Kong,)
RURAL RESULTS?
The rally in China’s A-share market is also driven by foreign investment. On Thursday, foreign investors had bought 48.7 billion Yuan ($ 7.53 billion) worth of A shares through Stock Connect this year, which is already a fifth of what they bought in 2020.
UBS expects flows of 200 billion Yuan into the A-share market in 2021, announcing an improvement in China’s legal protection for investors, better disclosure of information by key shareholders and more capable key companies in various industries.
(Graphic: Foreign investors continue to buy A-shares in 2020,)
Some investors believe that onshore exile is justified as a result of China’s tough economic recovery, continued policy support and the reopening of its capital markets.
“There is no fear in managing large stocks, seen as a safer bet as China pushes ahead with market-based IPO reforms,” said Wang Mingli, executive director Youpu Investment, a Shanghai-based private securities fund.
“Investors would come back even later if they reduced their current exposure as there are few options that represent the future economic development of the country,” he said.
($ 1 = 6.4676 Chinese Yuan)
($ 1 = 7.7517 Hong Kong dollars)
Reporting with Luoyan Liu and Andrew Galbraith in Shanghai; Edited by Ana Nicolaci da Costa