Hong Kong stocks will be under selling pressure on Tuesday, a broker said, as investors respond to a crackdown by Beijing on illegal cross-border stock trading which will impact an estimated $30 billion of investment in the city.
The Hong Kong market resumes trading following a public holiday and risk appetite will likely be curbed after China on Friday punished online brokers Tiger, Futu and Longbridge for moving Chinese money offshore without a license.
The industry-wide clampdown, which also requires a wind-down of illegitimate trading accounts in two years, could affect as much as HK$420 billion ($53.61 billion) worth of assets, including HK$294 billion in Hong Kong, Kaiyuan Securities estimates.
“This could roil market mood in the short term, but the long-term impact on liquidity is limited,” the brokerage said in a report ahead of the market open.
The campaign’s negative impact was already seen in the U.S., where the Nasdaq Golden Dragon China Index. HXC declined 2% on Friday in the wake of China’s announcement.
U.S.-listed KraneShares CSI China Internet ETF slumped 3% and Tiger parent UP Fintech tumbled 25%.
As trading resumes in Hong Kong, the Hang Seng Tech Index, a favourite target for mainland investors, could suffer.
Hong Kong small-caps may also be vulnerable to an expected liquidity drop, with small Hong Kong brokers such as Bright Smart potentially becoming the target of selling.
($1 = 7.8343 Hong Kong dollars)
Reuters
