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Tuesday, November 17, 2015, 21:11

Shanghai-HK stock connect 'a model' for the future

By Xinhua

Shanghai-HK stock connect 'a model' for the future
Secretary for Financial Services and the Treasury KC Chan (4th left), HKEx Chairman Chow Chung Kong (center) and HKEx Chief Executive Charles Li (2nd left) toast with other guests during a reception of the first anniversary of Shanghai-Hong Kong Stock Connect at Hong Kong Exchange Exhibition Hall, Central in Hong Kong on Nov 17, 2015. (Roy Liu / China Daily)

BEIJING - Mainland authorities will continue to advance the work on a stock connect scheme between the Shenzhen and Hong Kong bourses, a mainland securities regulator said Tuesday.

Authorities will also expand the quota of shares that can be traded under a similar stock connect program that already exists between Shanghai and Hong Kong, according to a speech by Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), published on the CSRC website.

The stock connect schemes allow investors to trade on both bourses under a quota and are seen as moves toward a more open capital market in the Chinese mainland.

More efforts will be made to further integrate the mainland and Hong Kong capital markets, Fang was quoted as telling a a seminar held in Shanghai that marked the first anniversary of the Shanghai-Hong Kong Stock Connect, which was launched last November.

As of Nov 13 this year, transactions under the Shanghai-Hong Kong Stock Connect reached 2.12 trillion yuan (US$332.4 billion), with 1.53 trillion yuan of the total made by Hong Kong-based investors on Shanghai-listed shares, Fang said in the speech.

Through the scheme, Hong Kong-based investors are able to buy shares in 568 Shanghai-listed companies while buyers from the mainland have access to 266 Hong Kong-listed stocks.

The program has been operating steadily and will be improved in future, while cross-border regulation and law enforcement will be strengthened, Fang said.

Shanghai stocks have attracted 121 billion yuan (US$19.73 billion) through this investment channel, about 40 percent of the 300-billion-yuan aggregate quota, according to the Shanghai Stock Exchange.

Hong Kong stocks have attracted 92.4 billion yuan through the program, about 37 percent of the 250-billion-yuan annual quota, according to Hong Kong Exchanges and Clearing Limited (HKEx).

"But the focus should not be on aggregate quota usage or trading turnover, because Stock Connect is much bigger than that: it's a catalyst, and a model, for the future," said Charles Li, CEO of HKEx, on the first anniversary of the program.

"It unlocked a door to the Chinese mainland, and in future will likely be seen as the precursor to a new generation of cross-border regulatory cooperation and market connections," he added.

The stock connect's performance may pave the way for the anticipated Shenzhen-Hong Kong Stock Connect. But the HKEx said that it has not reached any agreement on the establishment of the Shenzhen-Hong Kong Stock Connect yet.

Central bank governor Zhou Xiaochuan said in an article published on Nov 3 that China will launch such a program within the year, which substantially propped up stocks both on the mainland and in Hong Kong.

The central bank said on Nov 4 that Zhou's article was a speech delivered to central bank officials on May 27, before the start in mid-June of the stock market rout, which many analysts assumed would delay the launch of Shenzhen-Hong Kong Stock Connect.

There is still a lot of room for improvement in Stock Connect, in terms of new products, expanded quotas, enlarged stock eligibility criteria, said Li, adding that he is also excited about the Shenzhen-Hong Kong connect scheme, which will open up another Chinese mainland market for international investors.

Before the launch of Shanghai-Hong Kong Stock Connect, A-shares traded in China were only available to foreign investors via two quota systems -- the 2003 Qualified Foreign Institutional Investor and 2011's Renminbi Qualified Foreign Institutional Investor.

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