Since the beginning of the year, Hong Kong stock market has been experiencing a surge of buying: The main driver behind is the money from mainland China, through Stock Connect. Stock Connect is a special settlement channel allowing mainland investors to buy Hong Kong stocks through Shanghai or Shenzhen exchanges, and vice versa. A daily limit and a total quota are imposed on Stock Connect.
Since the beginning of the year (yes less than 3 weeks), more than CNY 160 billion (US$25 billion) has flown from mainland to Hong Kong. Below is the weekly stats, where you can clearly see the recent surge:
As a result, many stocks in Hong Kong have been pushed to historical high prices. Look at Meituan:
And Tencent, with the ticker 0700.hk, and a price that briefly touched HKD 700: SaaS stocks went even crazier, take WeiMob and Youzan, two Shopify equivalents of China, for example:
What is behind this?
While Hong Kong stocks, from a valuation perspective, are generally cheaper than mainland stocks. There is probably more to this. We find it hard to believe that all this money are spontaneous acts of individual investors in their best interest, without any coordination from the top.
More US-listed Chinese tech stocks will probably have their dual listing in Hong Kong in 2021, joining Alibaba, JD, Xiaomi and others. Hong Kong Exchange has already been a big beneficiary and will continue to be so: