Chinese stocks extended gains on Wednesday, aided by liquidity unlocked from recent IPOs, as some investors took advantage of last week’s market collapse to buy relatively cheap shares.
A stabilising mainland market benefits Hong Kong stocks, which were firmer, with the rise also underpinned by buoyant global markets on hopes that Greece will soon reach a deal with its creditors to avoid a debt default.
China’s key CSI300 Index rose 0.6 per cent by midday, while the Shanghai Composite Index gained 0.9 per cent.
In Hong Kong, the Hang Seng index was up 0.2 per cent, while the Hong Kong China Enterprises Index ended the morning session 0.6 per cent higher.
Hong Hao, chief strategist with BOCOM International, said that last week’s 13 percent slump in China stocks had wiped out excessively-leveraged punters in the market, setting the stage for healthier rises.
“Those who bet with the highest level of leverage should be out of the game, and the market is stabilising. The market uptrend is not changed,’’ Hong said.
Liquidity unlocked
The market, which was hit by a big wave of initial public offerings last week, also benefited on Wednesday from some subscription money unlocked from the IPOs, which analysts estimate to be around 2 trillion yuan ($322.2 billion).
But the pace of foreign inflows appeared to have come to a standstill, with the 13 billion yuan daily quota that overseas investors can use to buy China stocks under the Shanghai-Hong Kong Stock Connect scheme untapped by midday.
The previous two days were the second- and third-highest levels since the scheme’s launch in November. Investors used a combined 14.9 billion yuan over the two sessions to buy mainland stocks.
Infrastructure and transport stocks rose sharply, but banking and real estate shares corrected after the previous day’s jump, which some analysts attributed to profit-taking.
In Hong Kong, most sectors rose, except for telecommunications and consumer goods stocks.
The Hong Kong market will likely resume its upward trend, in tandem with its mainland peers, according to Alex Kwok, Hong Kong-based strategist at China Investment Securities (HK).
“A possible US interest rate rise later this year may have some short-term impact on the Hong Kong market, but it won’t change the long-term trend, as the move is expected, and would be gradual.
“China's stock market is still in an uptrend, despite recent volatility and is likely to challenge the previous record peak. A strong mainland market would give support to Hong Kong shares as well.’’
($1 = 6.2079 Chinese yuan)