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Zhang Shidong

As concerted state buying puts a floor under mainland China’s onshore stock market amid Beijing’s stabilisation measures, investors in Hong Kong worry about coping with high volatility at a delicate time, with multiple market-roiling factors.
These include geopolitical tensions, sluggish earnings growth, a stumbling artificial intelligence trade, possible US tightening and a looming supply glut from expiring share lock-ups.
Investor worries also grew after renewed military strikes in the Middle East sent oil prices above US$100 a barrel, while Washington’s latest initiative to buy up to US$6 billion worth of long-end Treasuries failed to stem bond-market sell-offs.
A possible unwinding of the Japanese yen-financed carry trade may also weigh on Hong Kong stocks, which remain vulnerable to overseas flows, after heightened expectations that the Bank of Japan would accelerate interest-rate increases. The shift could trigger sell-offs in assets bought with borrowed cheap Japanese currency.
“State intervention may iron out volatility and provide liquidity to stabilise [mainland] stocks, at least in the near term,” said Dai Ming, a fund manager at Huichen Asset Management. “The Hong Kong market is now to some extent marginalised, because of poor liquidity.”
The Hang Seng Index fell 1.3 per cent at the close on Thursday, tracking global caution over risk assets amid elevated Treasury yields and crude prices.
It marked the benchmark’s biggest decline in more than two weeks, while mainland equities reacted more mildly, with the CSI 300 Index edging 0.5 per cent lower.
Beijing’s regulatory effort to talk up stocks alongside at least 60 billion yuan (US$9 billion) of state buying seems to have temporarily eased panic selling, with a key tech gauge recouping some lost ground last week after sliding into bear-market territory in July.
With the China Securities Regulatory Commission repeatedly stressing stability to prevent sharp ups and downs on stocks, the cost of defying the state support would be high for any investor.
In contrast, Hong Kong stocks were on the back foot, as performance largely hinged on how the AI trade evolved and whether the US Federal Reserve embarked on a new tightening cycle, according to analysts.
A majority of Hong Kong-listed firms are from mainland China, including state-owned banks, energy firms and industrial giants. Some of them are already echoing Beijing’s stabilisation call to buy back yuan-denominated, mainland-listed stocks, known as A-shares, or increase their stakes.
State support is one reason cited by investment banks including Morgan Stanley for favouring A shares over Hong Kong shares.

The Hang Seng Tech Index has trailed the mainland’s peer benchmarks this year, partly because of its limited exposure to AI hardware companies.
Direct government intervention is rare in Hong Kong except in extreme turmoil. During the Asian financial crisis in 1998, the Hong Kong government spent about HK$120 billion (US$15.3 billion) buying key members of the Hang Seng Index, as well as index-futures contracts, to contain contagion risk arising from the currency market.
Like in other developed markets, Hong Kong’s support for stocks is mainly via indirect means, such as interest-rate cuts and liquidity injections into the financial system.
Given Hong Kong’s status as a global financial hub and its high level of institutional participation, direct intervention could expose the Hong Kong government or Beijing to criticism for the possible moral hazard of insulating investors from downside risks and encouraging them to take excessive bets, analysts said.
Such intervention, however, may have its place in the mainland market, where foreign ownership is low, at around 4 per cent of total market value, and a colossal army of individual investors tends to amplify swings.


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State buying appears to quash panic selling in mainland China-listed shares, but Hong Kong’s unsettled market can’t expect government intervention


State buying appears to quash panic selling in mainland China-listed shares, but Hong Kong’s unsettled market can’t expect government intervention.


Can Hong Kong stocks contend with wild swings without help from state hands?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}State buying appears to quash panic selling in mainland China-listed shares, but Hong Kong’s unsettled market can’t expect government intervention

State buying appears to quash panic selling in mainland China-listed shares, but Hong Kong’s unsettled market can’t expect government intervention