With US$17 billion surge, Beijing Stock Exchange’s star rises in year of misery for Hong Kong, Shanghai, Shenzhen markets
- Small-cap stocks on the Beijing Stock Exchange have enriched investors by US$15 billion in a rally from record lows in late October
- Low valuations, policy support and a fair amount of speculation by a growing pool of retail investors are behind the euphoria
A stupendous rally in small-cap stocks in Beijing this quarter has enriched investors by 118 billion yuan (US$17 billion). It’s a rare feat to end the year with a bang, while terrible records are etched in the Shanghai, Shenzhen and Hong Kong markets.
The euphoria is driven by multiple factors, ranging from market-friendly regulatory measures to attractive valuations. Ample liquidity also provided the fodder for some of the biggest rumours in town. Among them, a Stock Connect link with Hong Kong could open the door to much-coveted foreign fund inflows.
The contrast between China’s three biggest financial markets is grim.
The CSI 300 Index, which tracks the biggest stocks listed in Shanghai and Shenzhen, is headed for a third straight year of losses with a decline of 14 per cent, the worst run since its inception in 2005. The 82-member Hang Seng Index in Hong Kong has lost 15 per cent, and is set for an unprecedented four-year losing streak. In all, more than US$1.2 trillion has been lost in the three exchanges this year.
“Some investors will shift their focus to the Beijing exchange after the impressive rally, which is rarely seen in recent months,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “There are opportunities to make some big bucks for investors who have been severely burned on the main board this year.”
