(Bloomberg) — China is set to stop live broadcasts of foreign stock flows as early as Monday, the latest policy move to boost confidence by removing a potential source of negative data.
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The Shanghai and Shenzhen stock exchanges plan to stop displaying real-time figures on domestic stock purchases or sales through trade links with Hong Kong. Instead, the two exchanges will provide details of trading value on a daily basis, along with the 10 most traded stocks across the northbound channel.
While authorities said this was in line with international practices, it also represented an attempt to limit the impact of data showing selling of foreign funds on market sentiment. Chinese stocks have risen since the move was announced, a sign that investors have taken the move into account and are focusing on positive catalysts from attractive valuations to government efforts to ease the housing crisis.
“There are certainly some funds that take into account the short-term flows of northbound investors in their models, so that could lead to a lower trading frequency for some without real-time data,” said Chen Shi, fund manager at Shanghai Jade. Stone Investment Management Co. “But to evaluate investors, it doesn't really matter if they release the number monthly, as day trading is mostly just noise.”
Daily readings showing foreign inflows were partly blamed for deteriorating sentiment among Chinese retail investors, who still dominate domestic trading, during several episodes of sell-off over the past year. Some participants urged the authorities to hide these numbers.
When the two exchanges announced their decisions on April 12, they said that the changes would take effect “in about a month,” without giving a specific timetable. Shanghai and Shenzhen stock exchange officials responsible for media relations did not immediately respond to requests for comment.
The world's second-largest stock market has risen since February, after Beijing introduced a series of rescue measures ranging from broader trading restrictions to purchases by state funds and the appointment of a new head of its securities regulator. The recovery has gained further momentum in recent weeks, supported by new signs of economic recovery and the return of foreign funds.
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Northbound investors made a third straight month of net buying in April, the longest such period in a year that included record daily buying. Inflows continued this month at 4.8 billion yuan (US$664 million), meaning offshore funds added back more than half of what they sold since August.
While geopolitical tensions, including Washington's expected decision to impose tariffs on Chinese products such as electric cars, may once again hurt foreign sentiment, the presence of global investors in the Chinese stock market remains minimal. In April, the average daily value of local stocks traded via the stock exchange's links with Hong Kong was about 15% of the total trading volume on mainland stock markets.
In a sign that Chinese investors have largely ignored the upcoming loss of northbound live data, the benchmark CSI 300 index has risen more than 5% since the change was announced.
“Northbound is not the main flow factor in this market, and the intraday numbers are more a reflection of sentiment than changes in intraday fundamentals,” said Yang Bo, chief investment officer at Shenzhen Zhuode Investment Management Co. “This should help avoid the volatility caused by these mood swings, and is also beneficial for the long-term healthy development of the market,” he added.
–With assistance from Amanda Wang.
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