China to Nurture Stock Rally by Masking Live Foreign Flows Data

(Bloomberg) — China is set to switch off a live feed of foreign flows for stocks as early as Monday, the latest policy move to shore up confidence by removing a potential source of negative data.

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The Shanghai and Shenzhen exchanges plan to cease displaying real-time figures on purchases or sales of local stocks through trading links with Hong Kong. Instead, the two bourses will provide the turnover details on a daily basis, along with the 10 most-traded stocks via the northbound channel.

While authorities said this aligned with international practices, it also marked an attempt to limit the impact of data showing foreign funds selling on market sentiment. Chinese shares have rallied since the move was announced, an indication that investors have taken it in their stride and are focusing on positive catalysts from attractive valuations to government efforts to ease a housing crisis.

“There are surely some funds out there that factor the short-term flows of northbound investors into their models, so it could lead to a lower trading frequency for some without the real-time data,” said Chen Shi, fund manager at Shanghai Jade Stone Investment Management Co. “But to value investors it doesn’t really matter if they release the figure monthly as intraday is mostly just noise.”

Intraday readings showing foreign outflows were partly blamed for worsening sentiment among Chinese retail investors, who still dominate local trading, during several episodes of intense selloffs over the past year. Some participants had urged the authorities to obscure such figures.

When the two bourses announced their decisions on April 12, they said the changes will take effect “in about a month,” without giving a precise timetable. Shanghai and Shenzhen stock exchange officials in charge of media relations didn’t immediately respond to requests seeking comment.

The world’s second-biggest stock market has rallied since February, after Beijing introduced a slew of rescue measures from wider trading curbs to purchases by state funds and naming a new head for…


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