Hong Kong equity funds record US$24m in inflows in mid-April

There were flows despite foreign fund absence.

From 16 to 22 April, it has been noted that Chinese equity funds suffered record-high capital outflows of US$3.81b, while Hong Kong equity funds saw US$24m in inflows.

According to a research note from CCB International, the latter saw a steep drop from US$486m in the previous period (9-15 April).

Further, in 16-22 April, the Hong Kong Monetary Authority sold a total of HK$20.9b (US$2.7b) in Hong Kong dollars to maintain currency stability from heavy capital inflows.

Here's more from CCB International:

China: Weak ‘flash’ PMI necessitates further easing - HSBC’s China ‘Flash’ Manufacturing PMI came in below market consensus, necessitating further easing.

We continue to look for an additional interest rate cut of 25bp, likely in May, along with two more RRR cuts of 50bp each in 3Q15F and 4Q15F. We expect a brighter NBS PMI of 50.1 in April (Mar: 50.1), given its wider coverage of large enterprises, which tend to be more responsive to policy easing.

HSBC ‘Flash’ Manufacturing PMI slid to 49.2 in April from a final reading of 49.6 in March. The market had expected a flat reading from March.

Breaking down the results, the New Order Index (weight: 30%) fell to 49.2 in April (March: 49.8), marking its lowest level in 12 months. The Output Index (weight: 25%) fell to a 3-month low of 50.4 in April, down from 51.3 in March.

The Hang Seng Index (HSI) closed at 28,061 on 24 April, up 1.5% from a week ago, fueled by continued capital inflows through the southbound stock connect.

The Shanghai Composite Index closed at 4,394 on 24 April, rising 2.5% from a week ago. The daily increase in margin purchases for the Shanghai Stock Market accelerated to over RMB170b on 24 April, and once again broke its previous all-time high.

In our view, two things may have fueled the rise: (1) the RRR cut of 1pt announced on 19 April, and (2) the prohibition by Chinese officials of stock margin funding through ‘umbrella’ trust funds, which diverted some funding needs to margin purchases.

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