PSE Counterpart: HKEX President Charles Li Was Responsible and Right in Cautioning Against a Mania in 2015‏

In the Philippine setting, record stocks equals PSE officials singing hallelujah! In Hong Kong, record stocks from panic buying means alarm bells for HKSE officials

During the day the PSEi hit its milestone April 10 peak 2015, this period also coincided with the top in Hong Kong and Chinese stocks. 

Back then, I noted on my Prudent Investor Blog how the PSE counterpart in Hong Kong, Mr. Charles Li, was a lot less political and a lot more concerned with the state of the markets which had been characterized by frenzied bidding.  

Unlike the Philippine contemporary, whom would use every single opportunity to rationalize from price changes of record highs via the following publicity template—Today marks the Nth record highs, and x% gains for the year, from which represents investor confidence from corporate and economic growth…blah blah—thereby signifying total disregard of risks and blind adoration of the inflationary boom, given the latest milestone highs of Hong Kong stocks as a result of the spillover from the mania in Chinese stocks, Hong Kong Stock Exchange CEO Charles Li expresses concern over the current developments and writes to subtly warn of the developing mania in his article “A Little Advice to Investors” 

A year after, Mr Li’s warning turned to be prescient.

  

Mr Li reveals of a character totally different from the Philippine counterpart

 Some excerpts from Mr. Li’s article: 

Shanghai and Hong Kong through the opening of the bridge is a long-term, it is for the next ten or twenty years built, there is no "after this village do not have this shop" issue. You can also be based on their actual situation and needs of arrangements ready before starting your journey from leisurely to invest. Do not have to hurry, not to join in the fun. You can always find valuable stock, but anxious often inviting risk. You know, as in the holiday get together, like travel, get together and can easily lead to congestion or bridge stampede, but also very personal experiences influence… 

In this new era, endless opportunities, but often at risk. Hong Kong investors, new investors in the mainland market has brought unprecedented vigor and trading opportunities. At the same time, differences between the two sides in the investment ideas and risk awareness for Hong Kong investors (particularly retail), bringing new challenges and risks. How to keep the excitement of the market conditions calm and cautious, every investor must consider. 

For many mainland retail investors, the Hong Kong and Shanghai through the first step of their investments overseas, naturally requires caution.Investment is like swimming as the water if you do not, you will never learn to swim, but the water is often the first time beginners are bound to choke a few saliva. Therefore, investors must do their homework, careful decision-making, should follow suit. 

As market operators and regulators, we know that the rising volume means more responsibility, we will continue efforts to ensure a stable and reliable system, we will always monitor the market closely and take appropriate risks when necessary management measures to maintain the orderly functioning of markets. 

Shanghai and Hong Kong through is designed to provide an opportunity for everyone is not made quick fortune, but to help the early realization of China's national wealth diversified international configuration, we provide long-term wealth preservation and appreciation of channels.

And we are made to believe how invincible the Philippines is! 

Instead what this shows that is when politics invades the brain cells, they become addled.

Principal Agent Problem: Hong Kong-China Edition, Roots of Why The Mainstream MUST Remain Bullish

Despite growing risk conditions, this is an example why the mainstream has to remain bullish.

From Bloomberg’s Every Stock Was a Buy to This Analyst Team, Then Shares Tanked (May 30)

Companies probably love getting attention from analysts at Emperor Securities Ltd. in Hong Kong. Investors who followed their advice for the past year, not so much.

The unit of Emperor Capital Group Ltd. issued buy recommendations on every one of the 173 companies it reported covering from April 2015 through May 16. Its target prices, which the company says forecast trading levels within weeks, predicted gains of 25 percent on average. They are frequently the most bullish among analysts who cover the same stocks and list their calls with Bloomberg, including those based on the standard 12-month horizon.

The picks ended up being so wrong during the past year’s rout of Chinese and Hong Kong stocks that shorting every one would have resulted in gains of about 6 percent after just four weeks and almost 13 percent if all were held through last week.

Emperor’s record highlights the perils of equity trading for new retail investorsflooding markets in China and Hong Kong. Individuals piled into stocks as the Shanghai Composite Index recorded one of its best rallies ever and policy makers relaxed restrictions on mainland and Hong Kong citizens trading in each other’s markets. Emperor, which caters to such traders, said its revenue increased 64 percent in the year ending March 31 thanks in part to big increases in brokerage fees and margin-lending interest payments.

The firm was hardly alone in making bad calls during the turmoil. Forecasts by firms covering mainland Chinese equities were off by bigger margins on average than those of analysts researching stocks in the rest of the world’s 20 largest markets. Analysts covering Hong Kong-listed companies, Emperor’s focus, were second worst, with their average year-ago targets overshooting the benchmark Hang Seng Index’s current level by 44 percent.

“It’s our style to have a buy with a target price and a stop-loss price and not have hold or sell” recommendations, said Stanley Chan, director of Emperor Securities Research, by phone. The “small, local brokerage” offers trading ideas based on “market sentiment” and “news, events or momentum,” he said, not valuations, earnings potential and other fundamentals. “We pick stocks with a one-to-two-week horizon,” Chan said.

An investor buying each of the 173 stocks on the day of Emperor’s recommendation would have lost 0.9 percent after a week on average, 2.9 percent after two weeks, 4.2 percent after three weeks and 6.1 percent after four weeks, by which time 119 of the stocks had fallen, data compiled by Bloomberg show.

You see, the incentives for brokers, banks and fund managers are commissions and fees generated from transactions. On the other hand, the incentives for the public have generally been to make profits from trades. 

By virtue of asymmetric information (where sellers know more of the market than the buyers), when the mainstream peddles a ruddy outlook in order just to sell financial products, they take advantage of the public’s gullibility by purposely disregarding the risk from their proposed trades. They make it appear that that their trade recommendations are a one way road.

And this goes beyond scheming. Most have been ingrained to steadfastly believe that nothing can go wrong. That’s because when puritanical bullishness morphs into a creed**, this further incents the mainstream’s one sided recommendations.

In short, everything is a buy. The mainstream MUST remain bullish because this feathers their nests. So they won’t ever bite the hand that feeds them by telling of the public of the risks from the environment. They would censor or deflect or dismiss anything or any information that will go against their interests or beliefs.

This is called the principal agent problem or conflict of interest operating behind the interactions between financial agents and their clients. But this is not limited to finance as this is also seen in the world of politics.

So when the market goes awry, clients are left hung out to dry.

For as long as the market remains up, such conflict of interest won’t seem apparent.

But as Hong Kong and China’s experience has shown, when the market has been sharply down that’s when the public gets to know who’s been swimming naked

**In behavioral finance this is called the endowment effect or "people ascribe more value to things merely because they own them". For instance if one is invested into an industry, the endowment effect means that because one has already been exposed in it, one cannot go against this position because doing so only means an admission of a wrong decision. So during market cycle tops (manias) or economic cycle peaks, denials transforms into a religious like conviction.

At the day’s end: Bulls Make Money, Bears Make Money, Pigs Get Slaughtered

Headlines of the Day: Hong Kong and Singapore's Hissing Property Bubbles

Both images from Bloomberg...

See article here

See article here

Japan's Nikkei Crash 4.84%, Hong Kong's HSI Plummets 1.22% and Korea's Kosdaq Halted After 8% Crash!

Woe to Japan's pensioners. Continuing stock market losses might just bleed Japan's Government Pension Investment Fund (GPIF) dry. The GPIF had been pressured by the Abe administration in 2014 to makeover its portfolio by increasing its exposure in the stock markets (domestic and global). Now stock market losses have been mounting.

It has been a brutal week for the Japanese stock market. Today, the Nikkei 225 suffered another 4.84% crash! Today's slump marks the third consecutive day of heavy losses for the key benchmark this week.

From Bloomberg:

Stocks plummeted in Tokyo, with the Topix index posting its biggest weekly loss since 2008, as global equities plunged into a bear market and the yen rose to its highest level in 15 months.

The Topix sank 5.4 percent to 1,196.28 at the close in Tokyo as trading resumed after a holiday, capping a 13 percent weekly decline. The Nikkei 225 Stock Average fell 4.8 percent to 14,952.61. The yen traded at 112.45 per dollar after touching 110.99 on Thursday, the strongest level since Oct. 31, 2014, when the Bank of Japan eased policy.

“We’ve entered a different phase in the market,” Juichi Wako, a senior strategist at Nomura Holdings Inc. in Tokyo, said by phone. “Dollar-yen movements are at the center as it is now the foreign-exchange market that is in the driver’s seat. We’re at the mercy of how currencies move.”

The currency’s surge is intensifying speculation the BOJ may intervene to arrest gains that threaten to undermine almost three years of monetary stimulus. Finance Minister Taro Aso said Friday the government is watching market movements and will take any action necessary. Following a regular meeting with Prime Minister Shinzo Abe, BOJ Governor Haruhiko Kuroda said he also would watch market moves closely.

Part of the crash has been due to margin calls...

Investors said this week’s declines to below key levels have triggered margin calls among retail traders in Japan, who are being automatically forced to close souring bets. That’s adding to the selling pressure, according to Miki Securities Co.

The Nikkei 225 hemorrhaged a stunning 11.1% in a holiday abbreviated week.

Curiously,  this week's string of losses has brought the Nikkei back lower than when the Abenomics 2.0 was launched in 4Q of 2014. 

So the Abenomics stock market bubble has almost entirely been erased! This should be another wonderful example of the proportionality of bursting bubbles. Or as I previously noted, the bust will be roughly proportional to the imbalances acquired during the inflationary boom. 

And if the GPIF pushed the stocks all the way to the recent top, then today's downside breach of the 15,000 level must translate to heavy losses for the fund.

Well, most of Asian bourses have been under the spell of bears

Yesterday I noted that Hong Kong's Hang Seng index greeted the year of the Monkey (really year of the bears) with a selloff.  A follow thru session was seen today.

From Bloomberg

The Hang Seng Index lost 1.2 percent to 18,319.58, its lowest close since June 2012. HSBC was the biggest drag, capping a 8.1 percent two-day drop, amid concern over the perceived creditworthiness of European banks. Tencent Holdings Ltd., which has the largest weighting on the index, sank 1.9 percent. Hong Kong stocks have lost almost $2 trillion in market value from an April peak, data compiled by Bloomberg show, while a measure of equities around the world fell into a bear market this week.

“Global sentiment isn’t that great and with the world conditions worsening, the Hong Kong market will tag along with that downtrend," said Jackson Wong, associate director at Huarong International Securities Ltd. in Hong Kong. “We didn’t see any panic selling, but we don’t have any extremely positive catalyst to push up the stock market."

Hong Kong stocks extended their worst start to a lunar new year since 1994 as a global equity slump compounded concern that capital outflows, a slumping property market and China’s economic slowdown will hurt earnings. The Hang Seng Index has tumbled 16 percent this year, while the Hang Seng China Enterprises Index is trading at its lowest level since March 2009. Mainland markets resume trading on Monday after a week-long break.

The Hang Seng index fell 5.02% in a holiday truncated trading week.

This week's selloff in Hong Kong's equities maybe a bad omen for the resumption of trading activities in mainland China next week. Will stocks of mainland China crash too? Or will the national team will be active next week to prevent this?

And another noteworthy event today has been the crash of Korea's small cap index the Kosdaq, which prompted for a trading halt.

From Bloomberg:

Trading in South Korea’s Kosdaq exchange for smaller stocks was temporarily halted after the benchmark gauge plunged more than 8 percent on concern valuations were excessive relative to earnings prospects.

Trading was suspended for 20 minutes at 11:55 a.m. in Seoul after the measure dropped 8.2 percent. The index pared declines to 6.1 percent at the close. Celltrion Inc. was the biggest drag on the small-cap measure after the stock almost tripled in the past 12 months. The Kospi gauge of larger companies closed at its lowest level since August.

The Kosdaq index of more than 1,100 companies jumped 26 percent to outperform the large-cap gauge last year as investors piled into biotech shares and other smaller companies in search of earnings growth as smokestack industries stagnated. Celltrion, which developed an arthritis medicine, trades at 42 times projected 12 month profits, four times the Kospi’s 10.5 times.

Investors are selling small-cap stocks as they look for havens amid the global market turmoil, said Choi Kwang Kook, a senior fund manager at Assetplus Investment Management in Seoul.

World equities entered a bear market on Thursday amid concern over the strength of the global economy, while the yen and gold rallied. Korean markets were closed for the first three days of this week for holidays. Today’s 8.2 percent intraday decline by the Kosdaq is the biggest since December 2011.

The Kosdaq closed down by still a huge 6.06% today! 

Nonetheless, Korea's major benchmark the Kospi was spared of the carnage and was down by just 1.41% for the day and 4.3% for the week.

As noted in the report above, bears have now gained control of the world markets. 

For this week, ASEAN majors were spared from the bloodletting suffered by other regional peers. 

Will China's resumption of trading next week induce a uniformity of actions?

Hong Kong Opens New Year Trading with a 3.85% Slump! Australian Equity Benchmark in Bear Market!

China remains on a week long holiday to celebrate their New Year. Yet curiously, in Hong Kong where financial markets has re-opened today, the latter's stock market greeted the New Year with a slump!

The major bellwether the Hang Seng index plummeted 3.85%. What a way to meet the New Year!

From Bloomberg:

Hong Kong stocks fell in their worst start to a lunar new year since 1994 as a global equity rout deepened amid concern over the strength of the world economy.

The Hang Seng Index slumped 3.9 percent at the close in Hong Kong as markets reopened following a three-day trading closure, during which the MSCI All-Country World Index dropped 2.1 percent. The last time the gauge fell so much on the first day of the lunar new year, investors were worried about the health of former Chinese leader Deng Xiaoping...

Hong Kong’s benchmark equity gauge tumbled 12 percent this year through Friday amid concern that capital outflows, a slumping property market and China’s economic slowdown will hurt earnings. Tuesday’s violence in the shopping district of Mong Kok threatens to deter mainland visitors and worsen a drop in retail sales, according to UOB Kay Hian (Hong Kong) Ltd.

The Hang Seng index have been in a full blown bear market down 34.79% from its April 2015 peak.

Yet today's selloff had been broad based. Such selloff had already been signaled by recent developments at the property sector.

Last week, media reported that Hong Kong's property bubble have begun to hiss...

From another Bloomberg report

In a city that saw demand propel property prices to a record last year, the estimate that transactions reached a 25 year-low in Hong Kong shows how quickly sentiment has turned.

Home prices have slumped almost 10 percent since September and monthly sales in January fell to the lowest since at least 1991, according to Centaline Property Agency Ltd. Amid a spike in flexible mortgage rates this month and anemic demand for new developments, the low transactions volume for January is the latest evidence that prices have further to fall.

The point here is that frail conditions in China's economy has now spread to Hong Kong. Additionally, if equity markets performance of Hong Kong remains weak tomorrow, then this could foreshadow China's trading activities next week.

Worst, the feedback mechanism from Hong Kong's bursting property-stock market bubbles reinforces the emerging economic weakness that will amplify credit problems and which will feed on the ongoing asset deflation. 

So China and Hong Kong's fragile and deteriorating economic and financial conditions are likely to intensify and spread within the region.

Increased social frictions are likewise ramifications of a bursting bubble. The recent riots (called as "fishball revolts") are likely to escalate too.

And speaking of contagion from China, the Australian equity bellwether the S&P/ASX 200 fell into the bear market yesterday.

Today's .95% rebound has brought the index slightly above the bear market threshold. 

Yet this has not just been about contagion, but likewise signs of the unraveling of Australia's domestic asset bubbles.

More and more bourses have been falling into the clutches of the grizzly bears. The escalation of contagion only presages the imminence of a Global Financial Crisis 2.0.

Chart of the Day: Hong Kong's Hang Seng Index Falls Into the Bear Market's Grip

After China, Hong Kong major equity benchmark, the Hang Seng Index (HSI) fell into bear market territory (20% loss from the highs) today. (chart from investing.com)

Will the HSI bounce from here? Or will this highlight the next phase of the HSI's next leg down? 

And will the rest of Asia follow? And if the latter does, will these signal Asian Crisis 2.0?

Illusions of Paper Wealth: The Boom Bust Cycles of Two Hong Kong Billionaires

Paper wealth can be characterized as “easy come, easy go.”

The Chinese government’s stock market pump managed to produce many paper wealth billionaires.

By paper wealth, this entails of the net worth of individuals who owns the majority shares of a listed firm, whose fortunes have been dependent on the direction of share prices.

So a stock market pump inflates the owner’s worth and vice versa.

‘Easy come, easy go’ it has been for two of Hong Kong’s paper billionaires.

Piggybacking on the Chinese government’s stock market pump, Mr. Li Hejun, who at one time was considered China’s richest man based on the value of his majority stake in the Chinese solar company, Hanergy Thin Film Power Group Ltd. (Bloomberg HK: 566), according to Wall Street Journal, saw his holdings suffer when his firm’s share prices almost halved last Wednesday.

Trading was reportedly halted for the firm.

Interestingly, media seem to impute Mr. Li’s skipping his company’s annual meeting to the crash.

Yet prior to crash, according to the same Wall Street Journal, Hanergy’s shares “were up more than 42% since the beginning of the year and are more than triple their level of one year”.

Triple++ in about than a year!

Yet a day after the terrifying Hanergy episode, the fortunes a little-known electronics and property tycoon, Mr. Pan Sutong endured the same fate.

Stocks of Mr. Pan Sutong, the Goldin Financial Holdings Ltd. (Bloomberg HK:530) and Goldin Properties Holdings Ltd (Bloomberg HK: 283), which previously skyrocketed by about 350%, likewise collapsed!

According to the same report, "Goldin fell 43%, wiping $12 billion off its market value. A smaller company with the same owner, property developer Goldin Properties, fell by 41%, reducing its market capitalization by $4.6 billion"

Why shouldn’t a crash happen when prices have totally detached from valuations?

Here is a Bloomberg ex-post analysis: Goldin Financial’s revenue in the six months ending December was $34 million and more than 99 percent of its $181 million profit came from marking up the value of a 27-story office building in Hong Kong that’s still under construction. At its height on May 15, the company traded at a price-to-book ratio of nearly 25 times, compared with an average of about 1.5 times for stocks in the Hang Seng Index. (bold mine)

$22 billion worth of market cap for $34 billion of revenues at PBV of 25 times!

Back to the Wall Street Journal article, regulators have already warned of the excesses in Goldin Financials and likewise reported a connection between the two:

Filings with the Hong Kong exchange show Hanergy and Goldin Financial have previously worked together, although it was unclear whether the relationship contributed to Goldin’s fall. Hanergy said in a February disclosure it had appointed Goldin as an independent adviser for a supply agreement under which Hong Kong-listed Hanergy Thin Film would sell solar panels to its parent company.

The Securities and Futures Commission, Hong Kong’s market regulator, warned investors to exercise “extreme caution” with Goldin Financial in March, noting that just 20 shareholders—including its chairman who owns a 70% stake—held nearly 99% of the company. The company said at the time that there was little it could do because the SFC didn’t disclose who those shareholders were. Both Goldin Financial and Goldin Properties issued filings Thursday to the Hong Kong market saying they are not “aware of any reasons” for the movement of the stocks. The companies didn’t respond to requests for comment.

More interestingly, Goldin’s shareholders have represented big time institutions like Norway’s sovereign wealth fund. From the Wall Street Journal report: (bold mine)

Goldin Properties is building a 117-story skyscraper in Tianjin, a city in northeastern China, that will be ringed by China’s largest polo complex. Illustrating Goldin Properties’ size, it will join the MSCI China Index, an index followed by global investors, at the end of this month. The property company had already garnered big investors. At the end of last year, Norway’s government pension fund was the biggest institutional shareholder, with a stake valued at $30 million. The $926 billion fund has been holding the stock since at least 2008, though it has trimmed the position in recent years, according to its annual reports. Norges Bank Investment Management, which manages the fund, declined to comment. Goldin Financial provides a form ofshort-term corporate financing known as factoring. It owns wineries in France and California and wine-storage facilities in China and invests in property.

As I have recently pointed out, governments (mostly via sovereign wealth funds) and central banks have at least $29 trillion of exposure on global stock markets. And stock market losses would extrapolate to eventual ‘deficits’ that would be shouldered by taxpayers. Fortunately yet, Norway's pension fund has been one of the early buyers.

And individual boom bust chapters have not just been in a Hong Kong event. 

A Frankfurt listed German sanitary fitting firm Joyou AG (JY8: XETRA) which operates and has its headquarters in China recently saw its boom then nearly went to ZERO!

That’s because of this surprise announcement (Bloomberg): Joyou AG, which mainly operates in China, yesterday announced it will write down more than half of its capital and possibly file for insolvency. Losses of which according to Reuters has been due to “extraordinary writedown on shareholding in Hong Kong Zhongyu Sanitary Technology Ltd”

Nonetheless, the above reports represent the ex-post explanations.

But it is sad thing for the shareholders of these companies whose participation on the above issues would translate to staggering losses.

Crashing individual stocks have yet been a minority. Yet what happens when they become the majority?

Bottom line: Paper wealth are illusions. The obverse side of every mania is a crash.

In Pictures : Sign of Times: Euphoria!

What a week. Global stocks on a record ramp.

The above represents the performance charts of the Philippine Phisix, Japan's Nikkei, the German Dax and Hong Kong's Hang Seng from stockcharts.com. I chose 2013 as reference point in order to highlight the effects of Japanese government's Abenomics, China's multiple easing measures and the ECB's do whatever it takes QE.

All stocks indicated have been at various records or milestone highs!

The following pictures highlights on the prevailing sentiment.

The Nikkei Asia cheers on Japan's Nikkei's touching the 20,000 milestone last April 10

Mainland Chinese stock market retail participants stampeded to aggressively bid up Hong Kong's stocks as the state run China Security Journals called for a buy! (image from the Financial Times)

German publication Deutsch Welle celebrates the Dax's 15 year high!

The Philippine Stock Exchange believes that economic nirvana has been attained  as the Phisix broke through 8,000

All of the above have been expressive of the following:

Harvard's Carmen Reinhart and Kenneth Rogoff documented and chronicled all financial crises in the world during the last two centuries (1810-2010) and found a common denominator:

The essence of the this-time-is-different syndrome is simple. It is rooted in the firmly held belief that financial crises are things that happen to other people in other countries at other times; crises do not happen to us, here and now. We are doing things better, we are smarter, we have learned from past mistakes. The old rules of valuation no longer apply. The current boom, unlike the many booms that preceded catastrophic collapses in the past (even in our country), is built on sound fundamentals, structural reforms, technological innovation, and good policy. Or so the story goes.

This time is different!

Hong Kong Stock Exchange CEO Warns Against Panic Buying!

Unlike the Philippine contemporary, whom would use every single opportunity to rationalize from price changes of record highs via the following publicity template—Today marks the Nth record highs, and x% gains for the year, from which represents investor confidence from corporate and economic growth…blah blah—thereby signifying total disregard of risks and blind adoration of the inflationary boom, given the latest milestone highs of Hong Kong stocks as a result of the spillover from the mania in Chinese stocks, Hong Kong Stock Exchange CEO Charles Li expresses concern over the current developments and writes to subtly warn of the developing mania in his article “A Little Advice to Investors”

From Charles Li via hkex.com.hk (hat tip zero hedge) [note the following has been translated by google] (bold-italics mine, bold original)

This is a few days after Easter, the Hong Kong stock market sentiment particularly active, the Hang Seng Index rose continuously, the total market capitalization, trading volume and turnover of Shanghai and Hong Kong through both record highs. When the market cheered the piece, I was asked the most questions investors are: 1. Hong Kong stocks to buy now time? 2. The Hong Kong and Shanghai through full amount can not buy into the old how to do? 3. Will the Hong Kong stock market trading volume magnified more volatility?

I do not have a crystal ball can predict the future direction of the market, but as one of many bridges were Hong Kong and Shanghai through the bridge, I want to give everyone a little investment advice.

Do not worry!

Shanghai and Hong Kong through the opening of the bridge is a long-term, it is for the next ten or twenty years built, there is no "after this village do not have this shop" issue. You can also be based on their actual situation and needs of arrangements ready before starting your journey from leisurely to invest. Do not have to hurry, not to join in the fun. You can always find valuable stock, but anxious often inviting risk. You know, as in the holiday get together, like travel, get together and can easily lead to congestion or bridge stampede, but also very personal experiences influence.

Do not panic!

Shanghai and Hong Kong through the north and south have a total degree of two-way daily limit, its main purpose is to ensure the smooth operation of the early start. Hong Kong stocks through these two days in advance the amount of daily afternoon run, so many investors due to inability to approach and confusion, there are many voices called for an early expansion.

At this point, I would ask my friends do not panic, be patient, the regulatory authorities have been closely watching the development of the market, it will at the appropriate time to consider expansion. The reason I have confidence in this regard, based on the following two points:

First, although the Shanghai and Hong Kong through popular these days, but the total amount of funds through the Shanghai and Hong Kong through and out of the mainland is still very small. So far only the total degree of Hong Kong stocks through the use of 47.9 billion yuan (not including Hong Kong shares through trading on April 9 in), or 19%. Shanghai shares of the total through the use of only 1,157 million yuan, or about 39%. Mainland A-share market since late last year, the average daily turnover has remained at more than one trillion. Relatively speaking, the size of funds pass through Hong Kong and Shanghai and out of it is very limited.

Second, Hong Kong and Shanghai through the clearing and settlement throughout the closure, regulators can fully monitor risks. All transactions are within the exchanges, clearing the company's systems, have a clear record. Under such a system arrangement, funds are not in great disorderly capital A shares or Hong Kong stocks traded in the stock sold and then backtrack along the main market.

So closed and transparent system designed to protect the next Hong Kong and Shanghai can be closely monitored through both regulatory agencies and prudent risk control of the premise of carrying a huge cross-border transactions.

Countless opportunities, risks often!

Shanghai and Hong Kong through open interoperability between the Mainland and Hong Kong market, but also to respect the value of the investment philosophy of international institutional investors and retail investors dominated the mainland population began "historic crossroads." This historic intersection will emit a lot of reminders "chemical effect", and create a new era of China's capital market development.

In this new era, endless opportunities, but often at risk. Hong Kong investors, new investors in the mainland market has brought unprecedented vigor and trading opportunities. At the same time, differences between the two sides in the investment ideas and risk awareness for Hong Kong investors (particularly retail), bringing new challenges and risks. How to keep the excitement of the market conditions calm and cautious, every investor must consider.

For many mainland retail investors, the Hong Kong and Shanghai through the first step of their investments overseas, naturally requires caution. Investment is like swimming as the water if you do not, you will never learn to swim, but the water is often the first time beginners are bound to choke a few saliva. Therefore, investors must do their homework, careful decision-making, should follow suit.

As market operators and regulators, we know that the rising volume means more responsibility, we will continue efforts to ensure a stable and reliable system, we will always monitor the market closely and take appropriate risks when necessary management measures to maintain the orderly functioning of markets.

Shanghai and Hong Kong through is designed to provide an opportunity for everyone is not made quick fortune, but to help the early realization of China's national wealth diversified international configuration, we provide long-term wealth preservation and appreciation of channels.

I wish every investor mindful of the risks of investment success!

The obverse side of every mania is a crash