A similar measure to link Hong Kong with the Shanghai stock exchange took effect in 2014. Southbound investors can invest in 417 Hong Kong stocks including constituent stocks of the Hang Seng Composite Large Cap Index and Hang Seng Composite Mid Cap Index, any constituent stocks of the Hang Seng Composite Small Cap Index which has a market capitalisation of at least HKD5 billion.
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Hong Kong shares maintained strong upward momentum, with investors seeking to front-run expected fresh inflows from the upcoming Shenzhen-Hong Kong Stock Connect.
Today’s joint announcement by the CSRC and SFC about Shenzhen-Hong Kong Stock Connect and Shanghai-Hong Kong Stock Connect are available here. HKMA indicated it wouldn’t be shy about intervening if market volatility hits again.
“The Shenzhen-Hong Kong Stock Connect should move China further along the road to MSCI inclusion and we see this announcement as a significant catalyst for Chinese markets, particularly at a time where fundamental strength and industrial profitability are building”, said Douglas Morton, head of research at Northern Trust Capital Markets Asia. South Korea’s Kospi eked out a 0.1 percent loss and Hong Kong’s Hang Seng index was down 0.1 percent.
The long-delayed second link, which had been expected for more than a year, is part of China’s efforts to internationalize its capital markets and increase its global influence to something more in line with the heft of the nation’s economy.
Institutional investors will be able to trade all dual-listed shares and most of the Shenzhen Component Index’s 500 members, as well as small- and mid-cap shares with a market value of more than 6 billion yuan ($904 million).
China A-shares or mainland, renminbi-denominated stocks were previously restricted to domestic investors.
The trading link “is an exorcism of the fallout from the margin-financed collapse of mainland stocks in 2015”, he said.
The first stock connect program linking Shanghai to the offshore market in Hong Kong gives foreign investors access to only a fraction of the almost 3,000 stocks listed on mainland markets.
Chinese securities companies that facilitate inter-exchange trading may benefit most from the decision to create the new link, as it also includes abolishing the 300 billion yuan cap on trading in Shanghai shares via Hong Kong and the 250 billion yuan cap on trade going the other way.
Those looking to profit from arbitrage trading may turn to stocks listed in both Hong Kong and Shenzhen. Its stock jumped $4.11, or 7.5 percent, to $59.
A view of Exchange Square in Central, Hong Kong.
It also could stoke billions of dollars in inflow to mainland Chinese shares as active and passive managers adapt to benchmark changes.
Exports of goods made in Singapore fell 10.6% from a year earlier, compared with a revised 2.4% decline in June, trade-promotion agency International Enterprise Singapore said Wednesday.
The premier said the move will increase China’s global economic links while shoring up Hong Kong’s position as a financial center.
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How about the mainland China’s stock markets?
