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Mainland market growing in volume, influence

By Lillian Liu (China Daily)
Updated: 2007-05-10 09:13

To Michael Choi, a 40-year-old enthusiastic stock investor, checking share prices in the morning was as routine as breakfast.

Choi would browse the stock performance of Cheung Kong Holdings, Hutchison Whampoa Ltd and Towngas, all heavyweights on the Hong Kong exchange.

But his deeply-rooted habit recently changed.

Rather than checking the Hong Kong-based giants, Choi has found Hong Kong-listed mainland companies more appetizing, such as CNOOC, China's top offshore oil developer, and China Mobile, the country's largest mobile carrier.

Today, the mainland market is becoming increasingly influential on the Hong Kong exchange.

The central government recently launched new measures aimed at cooling the overheated economy and slowing down the Shanghai and Hong Kong exchanges as a result.

The new regulation, implemented on April 25, caused A shares to drop 1.7 percent, and pushed the Hang Seng Index slide 88 points.

But during the Golden Week holiday, investors on the Hong Kong exchange ignored fears the government would announce new rules to further cool the market.

On the last day of the holiday, the Hong Kong benchmark index reached a record high based on hopes mainland stocks would make further gains once trading resumed.

Last month, the value of stocks listed on the mainland markets surpassed those listed in Hong Kong for the first time as the government encouraged the domestic listing of State-owned companies.

On April 10, the combined capitalization of shares listed on the Shanghai and Shenzhen exchanges totaled 13.95 trillion yuan, surpassing Hong Kong market's capitalization of $1.79 trillion.

About 1 million new accounts are opened every week, and forecasts show 100 million active traders on the mainland by next year.

The value of mainland shares has more than tripled since July 2005, after a government plan to make more than $200 billion worth of State-owned stock tradable revived investor demand and paved the way for share sales by some of the largest enterprises in the country.

The Chinese economy, which in 2005 overtook Britain as the world's fourth biggest, has grown at an average rate of 9.6 percent over the past five years.

Long term, the mainland's stock markets will grow faster because of the sheer number of mainland companies that have not yet been listed, analysts say.

The Shanghai stock exchange said in a statement that it is courting HSBC and other high-profile foreign companies to list their shares on the mainland.

HSBC plans to expand its retail branch network across the country. It recently took advantage of new laws allowing it to incorporate its mainland operations locally.

A spokesperson from HSBC could not be reached for comment yesterday, but the company's subsidiary, Hang Seng Bank, has expressed interest in a mainland listing.