Mainland Chinese buyers last year made $87bn of net purchases of Hong Kong shares via the Stock Connect programmes © AP

Chinese money is pouring into Hong Kong’s beaten-down stock market, highlighting the growing sway of mainland traders as political turmoil threatens to undermine the city’s status as a global finance hub.

Mainland Chinese investors’ holdings of Hong Kong-listed stocks bought through market link-ups with Shanghai and Shenzhen climbed to a new all-time high of $235.7bn on Tuesday, according to Financial Times calculations based on Bloomberg data.

On Monday, mainland purchases of Hong Kong shares via the Stock Connect schemes hit a new daily record of $2.5bn. That flurry of purchases arrived on the heels of Trump administration sanctions targeting top Chinese tech groups, many of which are listed in Hong Kong.

The figures reflect mainland investors’ growing role in Hong Kong’s stock market as Beijing seeks to more closely incorporate the city, which has been racked by political chaos, into China’s financial system. Credit Suisse estimates that these investors hold about 8.5 per cent of Hong Kong’s free float market capitalisation and account for more than 20 per cent of daily turnover.

“The turnover in terms of [Stock] Connect, it’s enormous,” said Louis Tse, managing director at Hong Kong-based brokerage Wealthy Securities. Part of the appeal of Hong Kong stocks, he added, could be that they “look very cheap, and with a reasonable return as well”.

On Monday’s record-breaking session, mainland Chinese investors made $500m in net purchases of shares in both tech group Tencent and state-owned telecoms company China Mobile.

China Mobile, along with its state-run peers China Unicom and China Telecom, was on Friday forced to delist its shares from the New York Stock Exchange following an executive order from the White House. All three have jumped by more than 12 per cent in Hong Kong trading this week.

The Trump administration has also reportedly been considering a ban on US funds investing in Chinese tech groups including Tencent.

“It’s been a long time since these stocks have been down at these levels and it’s been artificially forced,” said Andy Maynard, a trader at China Renaissance in Hong Kong. In addition to strong buying from mainland retail traders, “institutional investors are viewing this as a nice way to get long”.

Last year, mainland Chinese buyers made $87bn of net purchases of Hong Kong shares via the Stock Connect programmes.

The Hang Seng index, which fell 3.4 per cent last year, has badly lagged both international and mainland Chinese benchmarks as Hong Kong’s economy has been hammered by the coronavirus pandemic. A sweeping national security law imposed by Beijing in June that followed months of anti-government protests has raised concerns over Hong Kong’s future as a global financial centre.

More than half of net inflows from mainland Chinese buyers came after the security law was introduced, data shows.

“After all the demonstrations and Covid hitting the market there, people here are taking the view that prices are probably at their bottom and that presents a buying opportunity,” said a director at one Shanghai-based brokerage.

“It’s the kind of trade you do if you think Hong Kong in the long term is going to do well,” he added.

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