Late Tuesday, China gave the green light to a stock-trading link between Hong Kong and the tech-heavy Shenzhen exchanges, while scrapping important limits on how much foreigners can invest in the country’s stocks in an effort to entice global investors.
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The Shenzhen-HK Stock Connect will help investors share more of the dividends of economic growth on the Chinese mainland and in Hong Kong and promote closer partnership between the two markets while shoring up Hong Kong’s role as an worldwide financial center, Li added.
The daily quota under the mechanism will be the same as that under the Shanghai-HK mechanism, or 13 billion yuan (1.96 billion US dollars) for northbound investment and 10.5 billion yuan for trading Hong Kong-listed shares.
Since its pilot at the end of 2014, the Shanghai-Hong Kong Stock Connect has withstood its market test, with steady and orderly overall performance, according to Chinese state media.
“A separate announcement on the commencement of Shenzhen-Hong Kong Stock Connect will be made in due course”, the SFC said.
The connection of the three exchanges will help more domestic and global investors use the Hong Kong market and in turn help China’s opening up of its whole capital market, said Li Quan, CEO of Guoking (HK) Securities and Futures.
It may take another three months for actual trading to start.
Over the longer run, Xiao expected a correction of the valuation gap between Hong Kong and mainland markets.
The addition of the Shenzhen Stock Exchange is a major step toward opening up the two mainland markets, said financial service experts.
KEEPING SCORE: Hong Kong’s Hang Seng gained 0.5 percent to 23,016.18 points and Tokyo’s Nikkei 225 advanced 0.5 percent to 16,679.89. But the Shanghai-Hong Kong link has proven hugely popular with foreign investors, who bought the maximum number of shares allowed in its first few days.
The premier said the move will increase China’s worldwide economic links while shoring up Hong Kong’s position as a financial center. After the change, mainland investors will be able to invest in up to 417 issues, up from 318 at present.
BHP Billiton was also up 2.8 percent after reporting an annual net loss of $6.39 billion late Tuesday – its worst-ever result after being hit by the impact of a fatal mine dam disaster in Brazil and weak commodity prices. Overseas fund managers can also trade in China through the quota-regulated qualified foreign investor programs.
Li dismissed fears that Hong Kong’s trading systems would be unable to handle the volatility if there’s a repeat of the market meltdown across the border, saying it’s no reason to delay the launch.
“Shenzhen Connect should move China further along the road to MSCI inclusion”.
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“In terms of my portfolio, I haven’t done anything around Connect yet as A-shares are underperforming and we also have a view that the Chinese currency may depreciate”, said Arthur Kwong, head of Asia-Pacific equities at BNP Paribas Investment Partners.
