Hong Kong stocks fell on Wednesday on fears that MSCI’s decision to include more mainland China stocks in a key benchmark index will threaten the financial centre’s role as a key global investor gateway to China. Declines in Hong Kong contrasted with gains in rival Shanghai, highlighting the changing investment landscape in China as the U.S. index publisher prepares to add 222 yuan-denominated A shares to its MSCI Emerging Markets Index starting June 2018.
After a slow start, China’s CSI300 index ended up 1.1 percent, while the Shanghai Composite added 0.5 percent. The Hang Seng index fell 0.6 percent to 25,694.58, while the China Enterprises Index, a popular channel for global investors to bet on China plays, lost 0.7 percent, to 10,393.59.
Hong Kong trading volumes have already been under pressure in recent years from a growing number of China exchange traded funds (ETFs) based in other countries. Alex Wong, a director at Ample Finance Group, said that the Hong Kong market was under pressure “on anticipation of capital outflows in the very long run due to the inclusion.”
Ronald Chan, Chief Investment Officer at Manulife Asset Management, Asia, said: “The universe to choose from is much larger in the domestic Chinese market compared to that of Hong Kong.” Most sectors lost ground, with financial and property shares leading the declines.