Hong Kong stocks firm, set for fourth monthly rise on mainland demand

SHANGHAI: Hong Kong stocks rose on Friday and were on track for their fourth consecutive month of gains, the longest winning streak since early 2019, as mainland buying hit a monthly record via the Stock Connect linking it and the Asian financial hub.

By midday break, the Hang Seng index added 0.4% to hit 28,652.12 points and the Hong Kong China Enterprises Index gained 0.5% to 11,387.84 points.

For the month, HSI rose 5.2%, while HSCE increased 6%, both posting their fourth month of gains in a row, thanks to strong mainland demand.

As of Thursday, mainland investors purchased net of around HK$300 billion ($38.70 billion) worth of Hong Kong stocks via the Stock Connect, and their buying was set to hit a monthly record, according to HKEX.

Shares of Chinese tech giant Tencent jumped 25% in January as mainland investors substantially boosted their holdings.

"Mainland institutional investors buy Hong Kong-listed stocks as they seek allocations to shares not listed in the A-share market," said Qu Xinghai, general manager at Tibet Hemu Asset Management.

"They prefer giants including Meituan, Tencent , HKEX and Xiaomi, while they are not interested in cheap traditional firms," he added.

Many also see bargains as the Hang Seng China AH premium index indicates A-shares of dual-listed AH companies trade at a more than 30% premium over their Hong Kong-listed shares.

Looking forward, KGI Securities expected southbound inflows to continue in a stable and healthy pace.

However, Sino-US tensions remain a worry, as investors looked for more clues on Biden administration's policy toward China.

Global index providers and the New York Stock Exchange dropped Chinese companies named on a US Defence Department list from their products.

"US bans would put investors holding related stocks under big pressure, as they worry about potential further sanctions," said Hemu's Qu.

On the mainland, the CSI300 index rose 0.5% to 5,405.88 points at the end of the morning session, while the Shanghai Composite Index gained 0.2% to 3,513.37 points.