China Shares Surge Sharply on Shanghai-Hong Kong Investment Rule

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China Shares Surge Sharply on Shanghai-Hong Kong Investment Rule

China stocks edged up to a near two-month peak after the China Securities Regulatory Commission announced it was going to permit cross-border stock trading between markets in Hong Kong and Shanghai.

The Shanghai Composite Index closed at 2,134.3 points after adding 1.4%. The CSI300 of top A-share firms listed in Shanghai and Shenzhen jumped 1.6%. Both stocks added to their highest since February 20.

Securities firm’s stocks increased on the announcement, as the CSI300 financial sub-index surged to levels last witnessed late last year.

China’s Ping An Insurance rose 1.7%, as CITIC Securities Co. Ltd added 9.7%, their highest percentage gain in a single day since November 18, with CITIC trading its highest volume of shares since October 2010. Sinolink Securities Co Ltd increased 5.2%.

According to Wall Street Journal, the rule will be implemented on a trial basis, whereby, mainland traders will be allowed to buy or sell shares of pre-determined firms in Hong Kong while letting their Hong Kong-based counterparts trade select stocks of firms listed in Shanghai, China’s securities regulatory authority said on Thursday in a joint statement with its equivalent authority in Hong Kong.

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“Policies launched by Beijing, including state-owned enterprises reform and the allowing of the issuance of preferred stocks to raise capital, would boost investor interest in blue chips,” said analyst Deng Wenyuan of Soochow Securities.

However, property stocks sunk on reports by the National Development and Reform Commission (NDRC) that property debt may bring about broad-based financial risks, raising concerns over the financing of China’s real estate market, Reuters reports.

The CSI300 gauge for property stocks was down 0.9% at the close of trading, after sinking 1.6% earlier in the day.

The CSRC said it will take up to six months for China to get ready for the official launch of the trial.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com