China to promote stock market rally by hiding live data on foreign flows

China is set to turn off live transmission of foreign feeds for stocks as early as Monday, the latest policy move aimed at boosting confidence by removing a potential source of negative data.

The Shanghai and Shenzhen stock exchanges plan to stop showing real-time figures on purchases or sales of local stocks through trading links with Hong Kong. Instead, both exchanges will provide turnover details daily, along with the 10 most traded stocks through the northbound channel.

While officials said this was in line with international practice, it also marked an attempt to limit the impact of data showing foreign fund sales on market sentiment. Chinese stocks have rallied since the move was announced, a sign that investors have caught the momentum and are focusing on positive catalysts, from attractive valuations to government efforts to ease the housing crisis.

There are surely funds that incorporate investors' short-term northward flows into their models, which could lead to lower trading frequency for some without real-time data, said Chen Shi, fund manager at Shanghai Jade Stone Investment. Management Co. But for valuation investors, it doesn't really matter if they release the number monthly, because intraday data is mostly just noise.

Intraday figures showing foreign capital outflows were partly blamed on deteriorating confidence among Chinese retail investors, who still dominate local trading, during several bouts of sell-offs over the past year. Some participants urged the authorities to hide these figures.

When the two exchanges announced their decisions on April 12, they indicated that the changes would take effect in about a month, without giving a specific timetable. Media relations officials at the Shanghai and Shenzhen stock exchanges did not immediately respond to requests for comment.

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The world's second-largest stock market has been recovering since February, after Beijing introduced a series of rescue measures ranging from broader trade restrictions to state-funded purchases and the appointment of a new head of the securities regulator. The rebound has intensified in recent weeks, supported by new signs of economic recovery and the return of foreign capital.

Northern investors completed a third straight month of net-net buying in April, the longest such stretch in a year that included record daily buying. Inflows continued this month with another 4.8 billion yuan ($664 million), meaning foreign funds reinvested more than half of what they had sold since August.

Although geopolitical tensions, including Washington's anticipated decision to impose tariffs on Chinese products like electric cars, could again hurt foreign confidence, the presence of global investors in the Chinese stock market remains weak. In April, the daily average value of domestic stocks traded through the stock exchange links with Hong Kong accounted for about 15 percent of the total turnover of mainland stock markets.

In a sign that Chinese investors have largely ignored the coming loss of live data to the north, the benchmark CSI 300 index has risen more than 5 percent since the change was announced.

The north direction is not the key flow factor in this market, and intraday numbers reflect more sentiment rather than changes in fundamentals during the day, said Yang Bo, chief investment officer of Shenzhen Zhuode Investment Management Co .Ending the live stream should help. avoid the volatility caused by these mood swings and is beneficial to the healthy development of markets in the long term, he added.