Hong Kong: Shares rise on hopes for new inflows from the mainland

[HONG KONG] Hong Kong shares flirted with seven-year highs on Tuesday, as investors returning from Monday's holiday piled into stocks after Beijing's newly-unveiled cross-border investment scheme fuelled expectations of more money inflows from the mainland.

The Hang Seng index rose 0.9 per cent, to 28,249.86, while the China Enterprises Index gained 2.6 per cent, to 14,801.94 points.

Markets in both places were encouraged by a cross-border investment plan announced over the weekend that would let funds domiciled in Hong Kong and China be sold in each others' markets, starting July 1.

The scheme, called mutual fund recognition, "will bring a fresh flood of mainland capital to Hong Kong's market and is a big positive for the city's stocks", China Investment Securities (HK) said in a note to clients on Tuesday.

Lu Wenjie, a strategist at UBS Securities, estimates that Chinese investors could potentially pump 200 billion yuan (S$43.5 billion) into Hong Kong stocks in the next two to three quarters, as Beijing is likely to guide excessive liquidity in the domestic market to Hong Kong.

China launched the landmark Shanghai-Hong Kong stock connect last November and plans to roll out a similar investment link between Hong Kong and Shenzhen this year.

Shares in Hong Kong Exchanges and Clearing Ltd jumped 5.4 per cent to record highs, as investors bet that the bourse would benefit from accelerated opening of China's capital markets.

REUTERS