Mainland Chinese markets and related China A-shares exchange traded funds rallied Monday on hopes of a formal announcement to a Shenzhen-Hong Kong trading link.
Leading the market surge on Monday, the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: PEK) rose 4.2%, VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: CNXT) gained 3.8% and db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR) increased 4.0%. Both PEK and ASHR are trading back above their long-term, 200-day simple moving averages.
PEK tracks the CSI 300 Index, which includes the 300 largest and most liquid stocks in the China A-shares market. CNXT includes the 100 largest China A-shares stocks listed on the Small and Medium Enterprise Board and the ChiNext Board of the Shenzhen Stock Exchange. ASHR also tracks A-shares taken from the CSI 300 Index.
The benchmark Shanghai Composite Index also rose to 3,125.2, breaking back above its 200-day trend line for the first time in a year.
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Chinese equities jumped Monday on renewed speculation for the launch of the Shenzhen-Hong Kong Stock Connect by the end of the year, reports Kenan Machado for the Wall Street Journal. The Hong Kong Economic Journal said a formal announcement could be revealed as soon as this week and that it would be officially launched in December.
The speculation is also backed by action from the China Securities Regulatory Commission, which said last Friday it has gathered a special work team with its Hong Kong counterparts to prepare for the link.
The Stock Connect link would allow Hong Kong investors to buy Shenzhen stocks, and Shenzhen investors to buy Hong Kong stocks.
According to the Hong Kong Economic Journal, the aggregate quota for the Hong Kong-Shanghai link will be removed, and only daily caps will be imposed on the Shenzhen program.
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“[Shenzhen-Hong Kong connect] has two positives: the first is it shows that this period of worry in Beijing about currency outflows has passed,” Erwin Sanft, a regional strategist at Macquarie, told the WSJ. “But in a more practical way, it opens up increased access to the China market.”
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VanEck Vectors ChinaAMC SME-ChiNext ETF