China tech stocks favored by overseas buyers through Stock Connect program

Northbound trading investors adjusted to a large extent their China A-share portfolios on Thursday, favoring financial and technology stocks and dumping at the same time Baijiu and solar tech stocks, reported Xinhua-run Xinhua Finance Friday.

They, referring to overseas buyers investing in A-share market via the Stock Connect, a mainland and Hong Kong mutual equity market access scheme, returned also back to net purchasing of A-shares at 1.59 billion yuan on Thursday. As a matter of fact, northbound trading investors have showed weakening purchasing sentiment towards A-shares since their notable holdings increase in late May.

Contrary to their net selling of 5.56 billion yuan A-shares on the first couple of trading days this week, they spent heavily on financial and tech stocks on Thursday. Among the top 10 most actively traded stocks by them on June 17, they pumped the highest 753 million yuan into buying stocks of East Money Information Co., Ltd. (300059.SZ) and bought 658 million yuan of stocks of Hangzhou Silan Microelectronics Co., Ltd. (600460.SH), which rose 9.99 percent to close at 46.56 yuan per share Thursday. In China, normal A-shares are restricted to rise and decline by less than 10 percent on each trading day except for their public listing day.

Meanwhile, they reduced 414 million yuan and 232 million yuan stock holdings in Kweichow Moutai Co., Ltd. (600519.SH), a famous Baijiu producer in China and solar tech firm LONGi Green Energy Technology Co., Ltd. (601012.SH).

Apart from financial and tech stocks, northbound trading investors began paying attention to stocks newly added to the basket of A-shares available for them to trade under the Stock Connect scheme, which include Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect programs.

Data from Choice, a financial data provider in China showed that the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect programs absorbed 96 new A-share market stocks and excluded 134 ones on June 15 due to constituents changes of Shenzhen 100 Index (399330.SZ) and SSE 380 Index (000009.SH).

For newcomer StarPower Semiconductor Ltd. (603290.SH), it has been actively purchased by northbound trading investors since June 15. By June 16, they held in total around 287,800 shares of the company and if calculated on basis of the company's average closing prices on June 15 and 16, northbound trading investors spent 72.19 million yuan on purchasing stocks of StarPower Semiconductor Ltd.

In a longer period for observation, the trend for northbound trading investors to overbuy tech stocks on the A-share market is relatively obvious.

Statistics with Choice showed that from June 1-16, the proportion of 24 A-shares held by northbound trading buyers in the 24 stocks' total tradable shares rose by more than one percentage points. Among them, tech stocks such as Shanghai Belling Corp., Ltd. (600171.SH), China Baoan Group Co., Ltd. (000009.SZ), Beijing Supermap Software Co., Ltd. (300036.SZ), Quectel Wireless Solutions Co., Ltd. (603236.SH) were mostly favored.

Currently, the growth momentum shift between different industries of A-shares is moving from medicine and economic cycle-sensitive sectors to a wider scale including also the tech sector, said Kang Chongli, deputy dean of the research institute of Yuekai Securities.

For northbound trading investors, changes of their stock portfolios reflected their growing attention on the tech sector, added Kang.

By far, net purchasing of A-shares by northbound trading buyers has exceeded the annual total of last year.

As for whether they will continue to add holdings of A-shares in the following period, some market players tended to believe that this will be a long-term trend given China's ongoing economic growth and capital market reforms.

Wang Delun, chief strategist with Industrial Securities thought that China's increasing economic competitiveness will attract continuously foreign capital inflow into A-share market and there is still large room for the proportion of foreign holdings of A-shares to grow.