Chart Book | Chart of the day: Symbolic move in China’s stock quota increase

Beijing’s announcement this week to quadruple the daily caps on the value of shares that can be bought through the Stock Connect programme is seen as part of China’s efforts to integrate its US$7.7 trillion stock markets with their global counterparts. While some argue the move may serve the purpose of boosting equity purchases through the links, data suggests it is far from reality. Ever since the stock links were launched, neither Chinese investors nor foreign traders have filled 10 per cent of both the northbound and southbound quotas on an average daily basis. The announcement by People’s Bank of China governor Yi Gang at the Boao Forum for Asia came before MSCI officially adds Chinese stocks to its global benchmarks next month. The index compiler may increase the weighting of the stocks following the quota move as it earlier cited the relaxation of the limit on stock purchases as one of the criteria for more inclusion, according to Shenwan Hongyuan Group.