The rally in mainland Chinese stocks spilled over to the Hong Kong exchange Wednesday after the extended holiday weekend, lifting non-A-shares China exchange traded funds.
Among the best performing ETFs Wednesday, the Global X China Industrials ETF (NYSEArca: CHII) surged 13.3%, Guggenheim China Small Cap Index ETF (NYSEArca: HAO) jumped 10.4% and Global X China Materials ETF (NYSEArca: CHIM) increased 10.1%.
Additionally, looking at the broad large-cap China ETFs, the iShares China Large-Cap ETF (NYSEArca: FXI) gained 6.0% and SPDR S&P China ETF (NYSEArca: GXC) rose 6.3% mid-Wednesday.
These ETFs all include Chinese company shares that are listed on the Hong Kong stock exchange. In contrast, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), which tracks mainland Chinese A-shares, was only up 0.3% Wednesday.
The benchmark Hang Seng Index was up nearly 4% on pent up demand, following the rally in mainland China’s market while Hong Kong celebrated an extended holiday weekend. Unlike China, Hong Kong’s exchange observed the Good Friday holiday, along with a Holy Saturday, Easter Sunday, Ching Ming Festival on Monday and another day off Tuesday following Easter Monday.
On Wednesday, volume on the Hang Seng surged to 250 billion Hong Kong dollars, or about $32.3 billion, three times the average daily volume over the past year and 20% more than the previous record in October 2007, reports Aaron Back for the Wall Street Journal.
Fueling the trades, mainland investors used up their daily 10.5 billion yuan, or $1.7 billion, quota to invest in Hong Kong through the recently adopted Shanghai-Hong Kong Stock Connect program for the first time since it began in November. Notable action came from mainland mutual funds accessing Stock Connect, which was previously limited to wealthy individuals.
Additionally, some mainland investors may have seen Hong Kong’s stocks as bargains after the rally in their domestic markets. The Shanghai index has increased 90% in the past year, whereas the Hang Seng has gained 15%. Over the past year, the iShares MSCI Hong Kong ETF (NYSEArca: EWH) rose 14.3% while ASHR jumped 97.6%.
iShares China Large-Cap ETF
For more information on the Chinese markets, visit our China category.
Max Chen contributed to this article.