The long-planned stock-trading link between Hong Kong and the mainland city of Shenzhen has been approved, a step toward opening China’s US$6.5 trillion equity market to worldwide investors.
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“We are excited about Shenzhen-Hong Kong Stock Connect, which will open up another Mainland market for worldwide investors and strengthen the Mainland’s links with Hong Kong”.
China has given its approval to establish a stock-trading connection between the Shenzhen and Hong Kong (HK) stock exchanges, the Shenzhen Hong Kong Stock Connect (SZHKSC).
The average price-to-earnings ratio on the Shenzhen Stock Exchange seems way too high compared with those in many more mature stock exchanges, including the one in Hong Kong. HKMA indicated it wouldn’t be shy about intervening if market volatility hits again.
The new Shenzhen-Hong Kong Stock Connect is expected to be operational in around four months’ time and will be similar to the existing Shanghai link, which was launched in late 2014.
In Hong Kong, the Hang Seng index added 1.6 percent, to 23,164.69 points, while the Hong Kong China Enterprises Index gained 1.0 percent, to 9,741.30.
Yet until recently, China imposed strict controls over foreigners’ access to mainland, renminbi-denominated stocks – known as A-shares.
Under the Shenzhen Hong Kong Stock Connect program, investors with brokerage accounts in Hong Kong will be able to invest in stocks on the Shenzhen Composite Index as well as stocks with market caps of at least 6 billion yuan listed on the Shenzhen Small and Mid-Cap Innovation Index, said Hong Kong Exchange in a public statement.
The exchange’s chief executive Charles Li said one of the aims was to build Hong Kong into an offshore wealth management centre for mainland investors.
But on a market capitalisation basis, they totalled half of the Hong Kong stock market operator.
Yes. The aggregate quota for both north and southbound trading has been abolished with immediate effect, putting it in-line with Shenzhen Connect.
FILE – In this Friday, Nov. 13, 2015, file photo, the American flag flies above the Wall Street entrance to the New York Stock Exchange. “The entry of worldwide investors will cause differentiation among the Shenzhen-listed companies and allow the cream to the rise to the top”.
China’s Cabinet approved a long-awaited initiative Tuesday that will give foreign investors more access to Chinese stocks by linking stock exchanges in Hong Kong and the mainland city of Shenzhen. Its stock jumped $4.11, or 7.5 percent, to $59.
The move demonstrates the “continuous commitment” of the Chinese government towards financial reforms, said economist Aidan Yao of Axa Investment Managers.
Separately, the Economic Information Daily, which is affiliated with the state-run Xinhua News Agency, published a front-page opinion article Thursday that said the recent regulatory clampdown will “purify” the stock market of speculative punts, restoring principles of value investing.
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Shares in Asia were mixed Thursday, with stronger regional currencies putting pressure on some stocks, while China’s plans to further open its equities market provided a delayed boost.
