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China has shut off live trading data on foreign investors’ dealings in mainland shares as regulators intensify efforts to bolster stock market sentiment and avoid a repeat of a steep sell-off in February.
The change, which took effect on Monday, affects data on so-called northbound trades from Hong Kong — those made by investors buying and selling shares listed on the Shanghai and Shenzhen exchanges through the Stock Connect trading link.
Chinese authorities had announced their intention to make the move in April, saying the change was in line with global practices and meant to “ensure the integrity of market data disclosure” and “match market development with proper information disclosure”.
The Hong Kong stock exchange confirmed the move in a statement over the weekend.
China has said it also intends to change its data disclosure on “southbound” trading of Hong Kong stocks by mainland investors. Trading through the Hong Kong connection is the main way for foreign investors to get direct access to mainland companies’ shares.
Chinese regulators have been curbing the release of high-frequency market data to stem volatility and reduce speculation. Last year, they required fund managers to stop showing live estimates of the net values of some mutual funds.
The bourses are replacing the real-time data on foreign flows with daily turnover figures, trading volume on equity-traded funds and data on the top traded stocks via Stock Connect.
The changes “will reduce short-term trading based on intraday data that shows foreign outflows”, said Yang Delong, chief economist at Shenzhen-based First Seafront Fund. “However, from a long-term perspective, the absence of a live feed should have a muted impact on the market.”
The termination of live data on foreign trades will increase challenges for quantitative funds in developing or refining their algorithm-driven trading strategies, said a Beijing-based private quant fund manager.
Traders in China’s $250bn quant sector have already had to overhaul their strategies in response to a regulatory crackdown and restrictions on speculative bets following a heavy sell-off this year.
Authorities blamed sales of Chinese stocks by global funds and the rapid trading patterns of Chinese quant funds for exacerbating a sell-off in February. The Chinese securities regulator in March started introducing measures to revive the market and rebuild confidence.
Under Wu Qing, who took over as chair of the China Securities Regulatory Commission in February, the regulator has intensified scrutiny of initial public offerings, expedited the delisting process for companies involved in market misconduct and increased onsite inspections of securities brokers to prevent insider trading.
The benchmark CSI 300 stock index has rebounded more than 15 per cent from its February low, while Hong Kong’s Hang Seng index has risen more than 25 per cent from its January low.
Foreign investors are starting to return to lower-valued, high-dividend Hong Kong-listed shares as they shift funds from other Asia-Pacific markets such as Japan and India, where currencies are under pressure from a stronger dollar.
