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Friday, May 27, 2016, 17:16

Shenzhen-HK link launch likely in weeks

By Lin Wenjie
Shenzhen-HK link launch likely in weeks
Premier Li Keqiang said in March that the central government will seek to launch the Shenzhen-Hong Kong Stock Connect this year. (Photo / IC)

HONG KONG - The launch of the Shenzhen-Hong Kong Stock Connect is set to be announced in June, according to the forecasts from various financial institutions as reported by the Hong Kong Economic Times.

"Some securities firms are now training their staff to prepare for the launch, as they all assume that the details of the stock connect will be released next month," an industry insider told the paper.

It has been 18 months since the Nov 2014 launch of the Shanghai-Hong Kong Stock Connect and the southbound aggregate quota for buying Hong Kong shares is about to reach its limit of 250 billion yuan ($38.1 billion) within 77 trading days at the earliest.

So the market expects the southbound aggregate quota under the Shanghai stock connect to be expanded along with the announcement of the Shenzhen link.

Under the Shanghai stock link, the northbound aggregate quota is set at 300 billion yuan, while the southbound aggregate quota is set at 250 billion yuan. Investors used up 152.5 billion yuan in the southbound quotas when markets closed on Friday.

Chang Jiang Securities (Hong Kong) told the Hong Kong Economic Times that the market anticipates the Shenzhen stock link  to be launched on July 1. If this is true, the best time for the announcement will be next week, as the securities firms need time to prepare. The firm also noted that as the trend of the yuan’s exchange rate is still unclear, the Hong Kong stock market remains a preferred investment destination.

UBS Wealth Management expects the southbound aggregate quota for the Shenzhen cross-border stock link to be set at 250 billion yuan, the same as the current southbound aggregate quota for the Shanghai-Hong Kong platform, and restrictions on individual account balance to be relaxed.

Individual investors participating in the Shanghai link have to hold an aggregate balance of not less than 500,000 yuan in their securities and cash accounts.

Responding to the report, a spokesman from the Hong Kong stock exchange said that the time-table for the Shenzhen-Hong Kong stock link to be approved by the mainland regulator remains unknown but the Hong Kong bourse will work closely with the related mainland department in this regard. He said also that the market would need three to four months to prepare for the new stock connect.

News of the imminent launch of the Shenzhen link revived investor confidence in the SAR, with the Hang Seng Index climbing 0.88 per cent, or 179.66 points, to 20,576.77. However, sentiment remained weak in the mainland. The Shanghai Composite Index inched down 1.4 points or 0.05 percent to 2,821.05, bringing total losses for the week to 0.2 percent, while the Shenzhen Component Index shed 0.13 percent to 9,813.63.

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