China’s Stock Rally Cools as Traders Shift Cash to Hong Kong

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Chinese stocks saw losses accelerate Tuesday afternoon, with the CSI 300 Index closing at the lowest in nearly two weeks as mainland investors rotated into Hong Kong-listed shares.

The CSI 300 Index of firms listed in Shanghai and Shenzhen closed 1.5% lower, with consumer discretionary and material stocks leading declines. While that move sent Chinese equities further away from a 13-year high -- which they hit last week -- inflows from the mainland into Hong Kong stocks had another record day, hitting $3.4 billion on Tuesday.

Relatively cheaper valuations have made the city’s stocks attractive to onshore traders. The one-day performance gap between the CSI 300 and Hang Seng Indexes was set for the biggest since February 2016, excluding holidays.

China’s Stock Rally Cools as Traders Shift Cash to Hong Kong

Montage Technology Co. and TCL Technology Group led losses on the CSI 300 Index with declines of more than 10%. Cosco Shipping Holdings Co. and Guangzhou Automobile Group Co. fell more than 9%.

Chinese shares surged about 30% over the past year, as the country’s economic recovery from the pandemic outpaced the rest of the world and Beijing eased monetary policy to aid growth. Buying momentum has lost steam in recent days, after a technical indicator on the CSI 300 Index reached a level that to some traders suggests a correction is around the corner. Borrowing costs have rebounded from record lows, partly due to the central bank’s recent moves to drain cash from the system.

©2021 Bloomberg L.P.

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