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Risk-on sentiment has propelled a stronger equities market in June

Equities
Greater China Sales Traders

Northbound Trading

  • A total of 42.6 Billion RMB (6.20 Billion USD) landed in China A-shares market in June via Northbound trading, a drastic turn of capital momentum following May’s record outflow at 53.7 Billion RMB.
  • The month accounted for 18 trading days with 4 days netting cash outflow, against only 2 net buying days in May.
  • The year-long-standing trade tension between US and China has taken a breather as President Trump revealed signals of resuming discussions between the highest officials from the 2 countries ahead of G20 meeting, sending optimism to the market that a trade resolution may become seemingly possible in the short-to-medium term. SHCOMP index picked up +2.77% and and SICOM +2.86% in the month.
  • In June, the PBOC injected 1.57 Trillion Yuan (228 Billion USD) into the market through open market operations according to bank data. With the brief relief in trade relations, the market reverted to capitalize on an improved funding liquidity amid a strong Chinese Yuan against the dollar. That explained the major support of A-shares market in the month.
  • Mainland Hydropower sector were also under spotlight in June after most listed companies in the space completed the hydropower station development and are willing to share operation profit by gradually increasing the dividend pay-out ratio. The overall dividend pay-out ratio was up from 32% in 2014 up to over 50% to date.
  • With the support from PBOC, northbound traders may, for the first time, obtain Renminbi (RMB) and conduct the related foreign exchange hedging based on the onshore exchange rate through the relevant Hong Kong banks. HKMA issued guidance on 21-Jun to allow greater funding and hedging flexibility for foreign traders which in turns will boost the attractiveness and convenience of stock connect trading

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