Chinese investors are going crazy for Hong Kong shares and they're surging higher

Hong Kong’s main stock index, the Hang Seng, has surged the past couple of days on massive interest from mainland China.

The index rose by nearly 3% on Wednesday and surged up by 6% at the open on Thursday. It’s up 2.9% as of 7:20 a.m. London time (2:20 a.m. ET), giving back some of those gains but still rising a lot. In the middle of the day, it hit levels not seen since 2007

Here’s how it looks:

Chinese investors on the mainland were recently given access to Hong Kong stocks, and according to CNBC, Wednesday was the first time the limit on transactions has been reached.

Here’s a snippet from CNBC:

Analysts say investors are seeking arbitrage profits from the massive valuation gap between Hong Kong and Shanghai shares in the same companies. Cheap valuations after a “five-year bear market” also contributed to the upswing, according to John Hetherington, regional deputy head of Asia Pacific Research, Daiwa Capital Markets.

“There is no doubt that money flows originating from China are helping [but] after a five-year bear market in Hong Kong, there’s now a lot of [chatter] about how this market is finally starting to move [and as] valuations get off a low base, you get that extreme movement,” he told CNBC Asia’s “Squawk Box.”

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