China will launch Shenzhen-Hong Kong Stock Connect program on a trial basis "at an appropriate time," according to a government work report delivered by Premier Li Keqiang at the annual parliamentary session.
Reports that the Guangdong Free Trade Zone (FTZ) is expected to be launched later this week have driven investors to a frenetic scramble for concept stocks on the Shanghai and Shenzhen bourses.
The rush drove up prices of stocks in the transportation, trade financing and logistics sectors despite a call for caution by market analysts who have remained skeptical about the rumor.
"The FTZ's launch would most certainly drive up prices of related stocks," said Hannah Li Wai-han, a strategist at UOB Kay Hian (Hong Kong) Ltd. "But, I don't expect all of them to outperform the market for long, especially those with weak fundamentals," she said.
Bored by a market lull in the past few months, investors have been spurred to action by the FTZ rumor, and their stock picks are obvious.
The rush for shares of China International Marine Containers (Group) Co Ltd - a Shenzhen-based manufacturer and supplier of containers, trailers and tank equipment - pushed its price up by 0.14 percent on Monday to close at HK$ 14.2 apiece. China Merchants Holdings (International) Company Ltd, one of mainland's largest shipping companies, advanced 0.54 percent to HK$28.1.
The company is high on Essence Securities' list of recommended stocks together with Shenzhen Chiwan Wharf Holdings Ltd, which is expected to benefit from the strong demand for harbor and trading financing services by the new FTZ.
But, not all stock analysts are as keen on the FTZ concept as Essence and some other securities firms.
Li reminded investors of the erratic price of the shares of Tianjin FTZ-related concept stock, Tianjin Port Development Holdings Ltd.
Guangdong FTZ sparks scramble for concept stocks
The company's shares hit HK$2 each when it was announced that the Tianjin FTC had secured the blessing of the central government. But the price of Tianjin Port's shares has since been dragged down by the company's lackluster performance to about HK$1.52 each.
Many of the once glamorous Shanghai FTZ concept stocks have also lost their luster, analysts noted.
Shanghai Industrial Urban Development Group Ltd has tumbled 23.4 percent since it peaked at HK$ 29.65 in December 2013 shortly after the launch of the Shanghai FTZ. Its shares closed 0.22 percent lower at HK$ 22.7 on Monday.
Meanwhile, analysts said Hong Kong stands to benefit greatly from the Guangdong FTZ which can further enhance the SAR's position as an international finance and trading center.
The Guangdong FTZ, covering Guangzhou's Nansha district, Qianhai in Shenzhen and Zhuhai's Hengqin area, is close to Hong Kong - the biggest offshore renminbi hub and a pioneer in the internationalization of the currency.
"Hong Kong expects to expand its offshore renminbi business with the establishment of the Guangdong FTZ," said Clement Yuen, Ernst & Young's tax leader, China South Region.
He said Hong Kong is now in a "role-changing" mode rather than what some distracters believed to be a "status-declining" rout. "Hong Kong, in previous years, has played a key role in helping foreign companies to make forays into the mainland market," he said. Now, "its role has changed to providing advice and funding to mainland companies going global".
Yuen said Hong Kong, as an international city, is feeling the competition pressure not only from Guangdong province and Shanghai, but also from London, Singapore and New York. "What Hong Kong should do is to cooperate more closely with the mainland and create a more positive global image," he said.