Buying in times of Uncertainty

Greater China Sales Traders

Summary:  Market seemed to have resume appetite in both A-shares and Hong Kong listed stocks alike when discount valuations give way to investors for bargain purchase. IPO market on the other hand extended its muted tone from July on the backdrop of escalating political tension in the city, with Alibaba giving a second thought of the timing of its Hong Kong listing.


Stock Connect and HK IPOs

Northbound Trading

  • Foreign traders bought a total of 13.2 Billion RMB (1.84 Billion USD) of China A-shares through the Northbound tranche via Shanghai and Shenzhen Stock Connect in August, representing a 10% jump of inflow from 12.0 Billion RMB in July as escalating trade tension between US and China weighed on sentiment.
  • Average daily turnover of Northbound stock connect aggregating both buy and sell flow jumped to 39.5 Billion RMB in the month, representing a 24% rise from July’s 31.9 Billion RMB.
  • Northbound flows accounted only 4.4% of China’s total turnover in the month.
  • China’s weakening cyclical economic outlook, structural challenges and policy responses remain the main theme overhanging the nation’s banks’ credit fundamentals.
  • Chinese Yuan has fallen substantially and broke through the long discussed 7-per-dollar support level that held for years after a series of dramatic escalation of trade war fuelling further concern on the apparently slowing global growth. This move has once again brought up the discussion of capital outflows and the sufficiency of foreign reserves underpinning the support for China’s banking system.
  • PBOC also rolled out the new borrowing rate benchmark in the form of Loan Prime Rate on 20-Aug, with an aim to ease borrowing cost and facilitate more transparent pricing and a stronger indicator on the broad bank loan market. This move will essentially dent the net interest margin for banks in exchange for better support to corporate borrowers and improve funding conditions around the domestic equity market.

Northbound Top 10 Names

Southbound Trading

  • Net purchases through the Southbound Stock Connect surged to 58.6 Billion HKD, tripled from 19.7 Billion from last month. Average daily market turnover in August reached 10.2 Billion, comparing to 7.4 Billion in July, is a 37.8% growth.
  • Mainland Investors found interests in Hong Kong listed companies as lingering political unrest in the city started to dampen equity valuations. The discount of H-to-A shares widened in August to the highest level since early 2018.
  • HSI Index shed 6.68% in the month as protest conflicts worsened in the region with increasingly violent incidents reported citywide. Meanwhile, the market is in search of a general direction at a time where US and China are stepping up the stakes in planning the tariff on imports from the counterpart countries.
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
Rooms 2001-02, 20/F York House
The Landmark
15 Queen's Road Central
Hong Kong

Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.