China plans to conceal real-time foreign stock flow data in an effort to calm markets and improve investor moods during a surge in stocks.
TakeAway Points:
- China intends to stabilise market sentiment amid a stock boom by ceasing to show real-time foreign flow data on the exchanges in Shanghai and Shenzhen.
- Investors are hopeful despite the lack of transparency in data, with their attention directed towards sustained foreign investment and economic recovery in April.
- A dividend tax exemption for private investors and the development of the Stock Connect programme are two initiatives aimed at bolstering Hong Kong’s financial industry.
Change in Market Data Policy
According to the report, China is about to make a big change in the way stock market data is communicated, as the Shanghai and Shenzhen exchanges will no longer broadcast real-time foreign flow information through trading links with Hong Kong. Instead, the exchanges will give daily turnover information and the top 10 most-traded stocks via the northbound channel. This change is anticipated to take effect as early as Monday.
The goal of this change, according to the authorities, is to lessen the influence of foreign fund movements on market sentiment by bringing the country into line with worldwide standards. This choice is made against the backdrop of Chinese stocks rising, which suggests investor optimism and a focus on favourable market factors, including competitive pricing and government actions to solve economic difficulties.
Market Response and Investor Attitude
However, the market has responded favourably to the news of the data sharing policy change, with Chinese stocks seeing a spike in value. Investor attention seems to be focused on indicators of a broader economic recovery and the return on foreign investment, rather than the immediate effects of diminished data openness.
April witnessed a notable resurgence in foreign investment as net buying from northbound investors persisted. The modest number of foreign investors in China’s stock market, notwithstanding possible geopolitical concerns, suggests that domestic variables and government actions are more important in determining market dynamics.
Chen Shi, from Shanghai Jade Stone Investment Management Co., stated that “there are surely some funds out there that factor the short-term flows of northbound investors into their models, so it could lead to a lower trading frequency for some without the real-time data… But to value investors, it doesn’t really matter if they release the figure monthly, as intraday is mostly just noise.”
Enhancing the Financial Market in Hong Kong
In tandem with the change in policy regarding market data, measures are being taken to strengthen the financial market in Hong Kong. Proposals to equalise investing conditions and avoid double taxation are noteworthy. One such suggestion is to exempt individual investors from the 20% dividend tax on Hong Kong stocks acquired through Stock Connect.
This action highlights a purposeful attempt to increase Hong Kong’s appeal as a financial hub, along with plans to extend the Stock Connect programme. A decline in IPOs and trading volumes, among other issues, have put the market through its paces, underscoring the necessity of revitalization initiatives to spur development and recovery.
