(Nov 17): Stocks in Shanghai climbed versus their Hong Kong counterparts as global investors purchased more than 80 percent of the mainland stocks allowed through the China exchange link that opened today.

Kweichow Moutai Co. and SAIC Motor Corp. each advanced more than 2 percent after analysts said the link would give overseas investors access to highly coveted mainland consumer companies. Daqin Railway Co. jumped 8.1 percent after Goldman Sachs Group Inc. and Standard Chartered Plc recommended the shares. Hong Kong Exchanges & Clearing Ltd. slumped 1.9 percent, paring gains to 40 percent since Premier Li Keqiang unveiled plans for the equity connect in April. Tencent Holdings Ltd. fell 1.4 percent.

The Shanghai Composite Index climbed 0.7 percent to 2,495.80 at the break, while Hong Kong’s Hang Seng Index slid 0.5 percent. About 82 percent of the daily quota for international investors buying China shares was filled, compared with 11 percent for mainlanders purchasing Hong Kong shares.

“It’s a good start for the Shanghai connect,” Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai, said by phone today. “It looks like overseas investors favor stocks without Hong Kong listings and those with high dividend yields” such as SAIC.

The CSI 300 Index gained 0.7 percent, while the ChiNext gauge of small-company shares jumped 2.2 percent. The Hang Seng China Enterprises Index dropped 0.9 percent. The Hang Seng China AH Premium Index rose 0.9 percent to 102.46, the highest since September 2013 as mainland dual-listed shares widened their premium to Hong Kong counterparts.

Consumer Shares

Consumer-staples producers in the CSI 300 gained 1.5 percent for the steepest advance among the gauge’s 10 industry groups. Kweichow Moutai, the biggest liquor maker, surged 4.7 percent. Dairy producer Inner Mongolia Yili Industrial Group Co. added 1.3 percent. SAIC Motor paced gains for consumer companies reliant on economic growth, adding 2.2 percent. The shares have a 6.2 percent dividend yield, compared with the benchmark one- year bank deposit rate of 3 percent.

Today’s debut of the bourse link marks one of China’s biggest steps toward opening up its capital account, increasing global use of the yuan and turning Shanghai into an international financial center. The quota system, which caps aggregate net purchases at 300 billion yuan in Shanghai and 250 billion yuan in Hong Kong, allows Chinese authorities to retain some control over cross-border money flows even as they broaden access to the biggest emerging market.

“Everybody was expecting this day and now there’s some profit-taking on good news, particularly for stocks related to the link program like HKEx and some Chinese securities companies, and A-H premium shares,” said Ben Kwong, a director at KGI Asia Ltd., which is participating in the link. ‘It’s a very big event but it’s just the first day. There’s of course room for improvement.’’

Record Inflows

About 77 percent of mainland investors surveyed by CLSA Ltd. in August said they wouldn’t participate in the link. Their lack of interest in Hong Kong shares contrasts with traders’ growing appetite for mainland stocks, which are luring record inflows through exchange-traded funds. Hurdles include the 500,000 yuan minimum account size for mainland investors to participate in the link, and the exclusion of small-cap stocks, favored by speculative traders for their high volatility, according to CLSA and Aviate Global LLP.

Chinese exchange-traded funds rallied in the U.S. on Nov. 14, with Deutsche Bank’s X-trackers Harvest CSI 300 China A- Shares ETF jumping 3.3 percent. China said after local markets closed it will give foreign investors a temporary exemption on capital gains taxes, clarifying rules before the program’s debut provides unprecedented access to mainland shares.

Tax Exemption

Foreign investors using the Shanghai-Hong Kong connect to buy yuan-denominated A-shares will be “temporarily” exempt from capital-gains tax, China’s Ministry of Finance announced. Institutions already investing in Chinese markets through the so-called QFII and RQFII programs will also get a tax waiver, the ministry said, without giving a time frame for the exemption.

Signs of a weakening Chinese economy were also limiting gains. Data released after the Nov. 14 market close showed the nation’s broadest measure of new credit missed economist estimates in October, suggesting liquidity injections from the central bank haven’t been enough to spur a pickup in lending. Chinese banks’ bad loans rose to the highest level since 2008 in the third quarter as a property slump and an economic slowdown boost the odds that soured credit will keep climbing.