Media365
Mainland Chinese investors, once perceived as a stabilising force in Hong Kong stocks, are this time adding to the market’s wild swings spurred by sharp movements in crude oil prices, flip-flopping from record selling to unprecedented buying within days.
The escalating hostilities in the Middle East prompted onshore Chinese investors trading Hong Kong’s stocks through cross-border Stock Connect programmes to behave more like short-term day traders.
They dumped HK$27.7 billion (US$3.5 billion) worth of Hong Kong stocks on Thursday – the most since the investment scheme began in 2014 – when US strikes against Iran escalated and disruptions to oil flows worsened after the closure of the Strait of Hormuz.
On Monday, just two days later, they made a complete about-face, snapping up a record HK$37.2 billion of stocks after headlines swirled that the Group of Seven was weighing the release of strategic oil reserves to ease supply shortages.
The swift shift in trading mentality among mainland investors helped push an implied volatility gauge of the Hang Seng Index to a near one-year high. The move serves as a reminder that even historically consistent buyers of Hong Kong stocks can be sensitive to abrupt external shocks and may amplify volatility through herd behaviour.
“Such trading behaviour tends to occur when expectations are topsy-turvy and visibility is extremely low,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “It reflects an unstable mentality. But for now, the worst may already be behind us.”
