Hong Kong opened a similar stock-trading link to Shanghai’s exchange almost two years ago, the Shanghai-Hong Kong Stock Connect.
Advertisement
Hong Kong exchange chairman CK Chow said the link-up would “open up another mainland market for global investors and strengthen the mainland’s links with Hong Kong” in a statement late yesterday.
In addition to via the Chinese government’s stock exchange connection programme, now boosted with the pending launch of the SZ-HK, overseas investors can invest in mainland China via quota programmes, such as the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme.
Li of HKEX said there will be no total quota for the Shenzhen and Hong Kong Stock Connect, while the total quota for the Shanghai and Hong Kong Stock Connect would be lifted immediately, which he described as a major step forward to further open up China’s market to worldwide investors. Whereas companies listed on the Shenzhen Stock Exchange are mainly companies with smaller market capitalisation from the high tech sector or start-up type companies. Southbound inflows through the Shanghai Hong Kong Stock Connect have amounted to nearly 100 billion yuan this year and the dual listed Hong Kong large-cap stocks are only 25% cheaper than their Shanghai-listed shares, down from 45% discount at the beginning of the year.
Stocks in Hong Kong and the mainland rallied in previous days in anticipation the link would shortly be announced, with the ChiNext Index jumping 3.3 per cent on Monday and Chinese stocks in Hong Kong climbing for an eighth day.
Global investors will be able to buy 13 billion yuan of Shenzhen stocks every day via the link, the same as they can in Shanghai.
Hong Kong’s Securities and Futures Commission and the China Securities Regulatory Commission launched the Shanghai-Hong Kong Connect in 2014.
But John Cannally, chief economic strategist for LPL Financial, said the Fed has chosen to let the currency weaken a bit in order to aid USA manufacturing and energy companies and other exporters.
China’s cabinet approved the long-awaited scheme on Tuesday, marking one of the country’s biggest capital market reforms in more than a year, although a launch date has yet to be set.
“What we are seeing in the oil market is an effective jawboning by the Saudis, talking up the prospects of an OPEC deal to move the oil price up”, Angus Nicholson, a strategist at IG Markets, said in a note.
In denying China’s inclusion in June, MSCI – whose emerging-market index is tracked by investors with about US$1.5 trillion in assets – cited a need for improvements in market access.
The Shenzhen stock market has exploded into the second busiest in the world, and technology stocks account for almost a quarter of its listings as Beijing encourages new economic growth drivers. There will, however, be daily quotas of RMB13 billion and RMB10.5 billion for northbound and southbound investments respectively, the same as the quota size for the SH-HK Connect. The city, which borders Hong Kong, led China’s export boom that began in the 1980s.
Advertisement
“I am sure Shenzhen connect is an important component of MSCI”, decision-making, Li said.
