Expert: Remain vigilant of hot money inflow from HK to mainland stock markets
08/13/2009 Source: People’s Daily
According to Shanghai Securities News, the latest report published by the China Academy of Social Sciences (CASS) pointed out that, impacted by a rise in domestic asset prices, a flow of hot money may return to China. CASS experts believe that Hong Kong may be the most recent source of hot money flowing into the Chinese mainland.
Zhang Ming, deputy director of the International Financial Research Office under CASS, said that the latest data from Hong Kong shows that nearly 100 billion HKD have flowed into Hong Kong since July 2009.
Zhang pointed out that the flow of hot money into Kong Kong may actually be targeted at the Chinese mainland, and not merely intended to appreciate the HK dollar. He said that Hong Kong is adjacent to the Chinese mainland and the continuously expanding “Chinese mainland and Hong Kong Closer Economic Partnership Arrangement” (CEPA) has created space for closer capital flows between the two sides. Therefore, Hong Kong is very likely the more recent source of short-term international capital flowing into the Chinese mainland.
He added that the financial crisis has significantly slowed down the growth of the European and American economies and also caused many international investors to turn their attention to emerging Asian markets. The Chinese mainland has become a place favored by large quantities of investment capital because it has the most attractive economic growth model and capital market trend, as well as the rapid increase in Chinese mainland’s asset prices caused by China’s astronomically large loans.
Although the expectation of Renminbi appreciation is not the biggest cause of an inflow of hot money, as with previous inflows of hot money, speculative hot money entering the Chinese mainland has mainly entered into the stock and real estate markets, where investment has high profits and products can be sold easily, said Guo Tianyong, director of the Chinese Banking Industry Research Center at the Central University of Finance and Economics.
Overseas capital investors have switched their focus of investment to the Chinese mainland’s stock markets. According to statistics detailed in the report on China’s QFII A-share funds which was jointly released by Thomson Reuters Lipper and Shanghai Securities News, as of the end of the first half of 2009, nearly all QFII funds have been invested in stocks.
Zhang said that the foreign exchange administration authorities in the Chinese mainland should remain vigilant to a flow of hot money to Hong Kong.
