China H-Share Strategy:Why has southbound flow slowed down despite recent CNY weakness?

An anticipated surprise

    The southbound trade of HK stocks by mainland investors has abated in recent weeks.The daily average Stock Connect southbound flow was only Rmb0.6bn in Octoberversus Rmb4.5bn in the first half of September. Have mainland investors (again) gottencold feet Given CNY weakness, we question their apparent reluctance to accelerateoverseas investments. We believe Chinese investors' interest in overseas assets actuallyremains strong. We anticipated the decline of southbound trade in our report Time toreduce exposure despite long-term trend of southbound fund flow, 12 September, andwe are confident that the southbound flow will pick up again in 2017.