Fast accumulating money of Chinese mainland investors proves its influence to Hong Kong stock market Monday as China begins to ease its restriction on institutional overseas investment, pushing Hong Kong stocks 500 points higher.

China Banking Regulatory Commission announced last Friday to revise Qualified Domestic Institutional Investor (QDII) scheme by allowing Chinese banks to invest up to 50 percent of its overseas investment in stocks, with a single stock capped at 5 percent of a product's asset value.

This investment expansion, which is more closely related with overseas stocks comparing with previous investment products, is considered a catalyst to Hong Kong stock market, the nearest and most convenient channel to suit the growing demands of mainland investors to invest overseas.

Meanwhile, the expansion is also regarded as a way to cool down the over heated A-share market as the financial critics and officials keep worrying about the bubble break and tried to contain by money-tight policy with little results.

Local analysts believe the ease on investing overseas may provide a way for capital flow and thus reducing the pressure of yuan appreciation and foreign reserves buildup.

They expect the expansion may attract more experienced and wealthy mainland investors to participate Hong Kong market as the threshold for single investors is a minimum of 300,000 RMB (39,000 U.S. dollars).

Incited by the expectation of money inflow, Hong Kong stock market Monday surged over 500 points to close at a record high of 20,979.24 with financial and blue chips going up the most since the market believes financial institutions and well performed mainland companies will become the beneficiaries.

Brokers said companies listed both in A-share and H-share markets will be favored by mainland investors since most of the H- shares are undervalued comparing with A-shares. Analysts said investors should aware that H-share may try to catch up with its more expensive A-share counterparts but it is also possible for some overvalued A-shares to go down to more reasonable H-share price.

Source: Xinhua