A Star Ferry boat crosses Victoria Harbour in Hong Kong
Brokers and traders in Hong Kong said the city’s trading boom in 2021 was largely driven by an influx of mainland Chinese investors © Tyrone Siu/Reuters

Stock trading volumes in Hong Kong have soared to four times those on London’s main exchange, as large technology stocks attracted soaring appetite from foreign investors for the “Nasdaq of Asia”.

Trading volumes in Hong Kong also reached almost 60 per cent of the New York Stock Exchange as investors, mostly from China, poured about $50bn into shares listed in the Asia finance hub this year.

Average daily turnover on the stock exchange in the 30 days to February 16 jumped to about $25bn, according to Financial Times calculations based on Bloomberg data, compared with about $10bn in the same period a year ago.

That is more than quadruple the average daily turnover on the London Stock Exchange during the same period. Earlier this month, London lost its crown as Europe’s biggest share trading centre to Amsterdam. The NYSE’s average daily turnover was $44bn.

Hong Kong this month hosted the bumper $5.4bn listing of Chinese viral video app and TikTok competitor Kuaishou, the world’s biggest tech initial public offering since Uber in 2019.

Line chart of Average stock exchange daily turnover ($bn) showing Hong Kong share trading rises to four times LSE levels

“The exchange is fast becoming seen as the Nasdaq of Asia thanks to continual tech listings that are attracting new capital to Hong Kong,” said Angus Richardson, co-head of pan-Asian execution services at Citigroup.

Including other trading venues, London’s total average daily trading volumes in February were about $9.5bn, according to data from Cboe Europe.

Brokers in Hong Kong said the city’s trading boom this year had been largely driven by an influx of mainland Chinese investors. Many have focused on scooping up stocks listed in Hong Kong, which are valued at a significant discount to those trading in the mainland.

The boost of liquidity from mainland traders could also provide more depth to Hong Kong’s market, a major draw in its battle with bourses in New York to capture a greater share of lucrative Chinese tech IPOs.

The surge in trading volumes in the city has also come despite political upheaval following Beijing’s introduction of a sweeping national security law last year.

“Hong Kong has had a difficult 18 months but the surge in trading shows that investors think this may be settling down and Hong Kong will be on a path to growth,” Richardson said.

Hong Kong’s benchmark Hang Seng index is up almost 13 per cent this year, partly because of optimism surrounding China’s economic recovery from the coronavirus pandemic, compared with less than 5 per cent for Wall Street’s S&P 500 and London’s FTSE 100.

“All the new volume that we’ve seen on the upswing is predominantly southbound investors,” said Andy Maynard, a trader at investment bank China Renaissance in Hong Kong, referring to mainland Chinese buyers.

Chinese investors are able to buy and sell Hong Kong shares through Stock Connect programmes with Shanghai and Shenzhen. Through these link-ups, mainland Chinese investors have purchased a net $49.1bn of Hong Kong-listed equities in the year to date, FT calculations show, compared with about $8bn a year ago.

Line chart of Hang Seng Stock Connect China A-H Premium index showing Chinese onshore  stocks are valued at a premium to those in Hong Kong

Maynard said mainland Chinese investors’ share of daily turnover in Hong Kong had doubled in recent weeks to about 30 per cent.

Brokers and bankers said a flurry of high-profile secondary listings by Chinese tech groups had also injected more liquidity into Hong Kong’s market. The listings have coincided with moves to evict Chinese companies from US exchanges unless they comply with American accounting rules.

“Normally, you would tell clients not to do a secondary listing because [the liquidity] would all flow back to the primary exchange,” said one banker at a large Wall Street investment bank. “But now there are enough Asian investors that don’t want to trade — or can’t trade — in the US, and so are more comfortable in these markets.”

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