Day 3

The third day of trading after the announcement allowing individaul Mainland citizens to trade HK stocks saw the HSI close up 617 at 22,346 with turnover of HK$80.07 billion. Buying was concentrated in H-shares i.e. shares of companies incorporated in the Mainlnad as these are expected to be the main beneficiaries of the relaxation.

There was some question as to the role of QDII now that individuals will be allowed to trade HK shares. QDII is aimed at the institutional market players with upwards of RMB 300,000 while individuals will be required to open accounts with at least RMB 100,000.

Effective today, interest rates on loans will rise by 0.18 percentage point (one-year) to 7.02% from 6.84%. Interest on deposits will go up 0.27 percentage point to 3.60% from 3.33%. The interest rate increase announced yesterday after market close by the Mainland authorities appears to have had little or no effect.

With the expiry of futures and options next week, there will be some interesting trading situations. Buy on weakness and sell into strength.

Note: As a matter of interest (pun strictly intended) interest rates and corresponding changes are divisible by 9. Mainland banks work on 360 days basis and using this makes it easier to calculate the interest.

Market Indices

• Hong Kong Hang Seng: 22,346.88 +2.84%
• Japan Nikkei: 15,900.64 -0.00%
• Shanghai Composite: 4,980.07 +0.50%
• Singapore STI*: 3,301.75 +2.26%
• South Korea Composite: 1,759.50 +1.34%
• Taiwan Weighted: 8,493.46 +0.17%

*Intraday trading