Hong Kong Exchanges and Clearing Ltd (388.HK) is looking into the real-name system for north-bound trading via the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect.
This shows the Chinese government’s interest in knowing who is trading A-shares, which is good news as it reduces the worry of A-shares being attacked by international “financial crocodiles”.
Aside from that, the Chinese government could rest assured even if the A-shares are speculated as long as it meets the basic requirement of having a low level of leverage.
In June next year, the MSCI will include China A-shares in the MSCI Emerging Markets Index, another piece of good news for the A-shares as the demand from international funds will increase.
Now that we look at it, the implementation of the real-name system is the “preparatory work” before A shares’ MSCI inclusion.
China Literature should be the strongest in the long run
Though Razer Inc (1337.HK) did not perform as well as China Literature Ltd (772.HK), it still beat ZhongAn Online P & C Insurance Co Ltd (6060.HK).
The three stocks were listed at a time that’s very close to each other, and thus their performance on the first day of listing was quite representative.
In the long run, China Literature should register the strongest performance.
AIA Group Ltd (1299.HK) reached historical high again. AIA was one of the three power stocks (the other two being Tencent Holdings Ltd and HSBC Holdings) that steered the drastic growth of the Hang Seng Index at the start of the year.
Now, as HSBC’s growth slows, only Tencent and AIA continues to reach record highs. The reason being is that they are not tied down by “crab stocks”.
The impact of “crab stocks”
Crab stocks, or tied-up stocks (not to be confused with “crap stocks”), are always a hindrance to the upward movement of stock prices.
Investors would gladly hold on to the stocks that have reached historical highs as those who have made profits would want to see the stock prices climb even higher instead of selling them.
However, it’s a different story when it comes to tied up stocks.
Suppose one has bought a stock at $10 per share only to watch it fall to $5 and was still reluctant to sell it. But when the stock rises back up to $10, the investor’s first reaction would usually be to sell.
HSBC met its resistance at around the HK$80 mark. In other words, this is where it was “tied up”. Investors would need to be sufficiently patient to wait for the tied up investors to offload their holdings.
Foreign financial stocks might be worth some speculation
As the China’s 19th Communist Party Congress promoted life insurance with the aim to provide for the elderly, mainland insurance stocks were driven up by speculation.
When US President Donald Trump visited Beijing, the Chinese government presented another gift—opening the finance sector to foreign ownership. That gives speculative value to overseas financial stocks as well.
AIA Group is one of the stocks that were able to benefit from the good news, and I am still optimistic about its future.
This article was translated from Chinese to English by Chen Xushuang. Click here to read the original article.