As much as US$200 billion will go to the Hong Kong stock market within a year under a new investment plan from the mainland, according to a research report released Tuesday from BOC International.
The State Administration of Foreign Exchange's plan, known as the "through-train to Hong Kong stocks," allows mainland individuals to invest stocks listed in the Hong Kong stock exchange directly, considering certain requirements. The program, announced in August, still awaits the government nod.
The report, composed by Luo Zhiheng, chief of the research department of BOC International, also expects that along with the "through-train" scheme, the Hong Kong stock market will also welcome US$50 billion from qualified domestic institutional investors (QDII) funds.
Money outflow from the above sources, together with the returns on red chip stocks, will result in a substantial amount of money contracted away from the domestic A-share market. The report forecasts the bullish trend to wane in the fourth quarter.
On the other hand, the report noted valuation of H-shares will benefit from the huge capital inflow from the mainland. Investment opportunities are sure to follow.