Stamp Duty & Bubble Warning Put Brakes On Mainland Flows

Last week's stamp duty hike for Hong Kong equities has resulted in mainland Chinese investors pulling back from investment into the city's equity markets via the southbound leg of the Hong Kong-China Stock Connect schemes. As we flagged last week, Wednesday saw the largest ever round of mainland Chinese net daily selling of Hong Kong equities via the southbound link, breaking a streak of daily net inflows that spanned back to 21 December 2020. Since then, 2 of the 4 trading days have seen net selling via the southbound leg of the Connect schemes, resulting in net sales of ~HK$27.6bn over the 5-day window.

• Yesterday's warning from Chinese regulators re: worries of bubbles in international financial markets and the failure of Hong Kong's Financial Secretary to explicitly rule out further stamp duty increases for equity trading (although he did note that there are no such plans in the pipeline at present) resulted in some modest net outflows on the day, but net sales via the southbound link haven't got anywhere near challenging the ~HK$19.96bn daily record lodged last week.