China's decision to raise stock trading tax, which caused a big fall of A share market on the Chinese mainland Wednesday may be a good news to most Hong Kong investors as they are expecting more mainland capitals to flow in through Qualified Domestic Institutional Investors (QDII) scheme to boost the sluggish Hong Kong market.

Hong Kong stocks suffered a consecutive three-day loss until Thursday, when the benchmark of Hang Seng Index closed 340.71 points higher to 20634.47. However, most investors thought the three-day's fall just as a short term reflection dragged by the fall of A-share market due to the series of controlling policy, including the stamp duty rise from 0.1 percent to 0.3 percent Wednesday.

Analysts said on the contrary to the previous containing policy issued by the government to cool down the market, including reserve ratio rise, interest rise and the expansion of exchange floating range, the stamp duty rise is interpreted by Hong Kong investors as positive instead of negative.

They believe the stamp duty rise may promote more mainland investors to Hong Kong through QDII or through other investing channels.

Some brokers even predicted that China Banking Regulatory Commission may further ease the investment volume of QDII by allowing Chinese banks to invest more than 50 percent of its overseas investment in stocks, which may attract more investors to put more money to overseas market instead of A-shares and thus reduce the A-share bubbles.

Hong Kong stock market, which is an international investment platform yet getting more and more sensitive to the movement of A- shares, used to follow the up and down of A-shares. However, the pattern has changed this year into only following A-share's down trend but remaining sluggish even if its A-share counterparts going sky high, which leads to further price gap between H-shares and A-shares.

Investors believe the money flow in through QDII may focus on companies with both A-shares and H-shares because the price gap between the two parts will attract investors to buy the relatively cheaper H-shares hoping the latter's catching-up may bring them big rewards.

If that is the direction of Hong Kong stock market, analysts believe a balance will be achieved between A-share and H-share and therefore investors in Hong Kong market may not need to worry about further going down. Instead, they need to buy and wait for QDII to bring money in.

Source: Xinhua