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Shenzhen Studies Hong Kong Tie-Up as Shanghai Link Boosted
from Bloomberg
Hong Kong is taking steps to increase trading through the Shanghai exchange connect as officials discuss setting up a separate link with Shenzhen.
Shenzhen and Hong Kong will seek regulatory approvals once their plans are “mature,” the mainland city’s stock exchange said in a one-sentence statement on its microblog yesterday. Hong Kong Exchanges & Clearing Ltd. said it will offer new trading accounts to fund managers as soon as March, enabling them to overcome the main hurdle stopping them from selling Shanghai-listed shares. (388) Shares of Hong Kong’s bourse operator rose 1 percent at the close, while mainland brokers rallied.
A trading link with the Shenzhen exchange would allow foreign investors access to some of the nation’s most dynamic private companies in the technology and health-care industries. The ChiNext index of smaller companies, which is listed in Shenzhen, has more than doubled over the past two years as investors speculate they will benefit most from the nation’s move toward an economy driven by domestic consumption rather than investment and exports.
“That’ll be a further step for China’s market to be globalized,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The Shenzhen exchange has a good resource of small caps.”
The Shanghai and Hong Kong stock connect, which started in November amid much fanfare, isn’t generating much interest among investors. Foreign buyers have filled about 25 percent of the quota to buy mainland shares and 6 percent of the quota for Hong Kong stocks, according to data compiled by Bloomberg.
Link Obstacles
One problem is that Chinese regulations compel international investors to deliver securities to their broker before 7:45 a.m. in Hong Kong on the day they plan to sell the shares on the mainland. Many asset managers have compliance rules that prevent them from transferring equities before they have sold the securities.
HKEx will register the new trading accounts with Hong Kong Securities Clearing Co., one of its subsidiaries. That will allow China Stock Connect -- the gateway for investors wanting to trade Shanghai shares -- to verify the money managers’ holdings without forcing them to transfer the equities to a broker, according to a HKEx presentation posted on its website.
The Hong Kong exchange expects to start testing the new system in February before launching it as early as March. Hong Kong’s Securities & Futures Commission needs to approve the project before it can go live.
HKEx Rally
The Hong Kong-Shanghai connect allows foreign investors to purchase aggregate 300 billion yuan ($48.3 billion) of so-called A shares on the Shanghai exchange, while the total quota for the purchase of Hong Kong stocks by mainland investors is 250 billion yuan.
Shares of HKEx have rallied 42 percent over the past year, compared with a 4.3 percent gain for Hong Kong’s Hang Seng Index. The Shenzhen Composite Index has jumped 40 percent, while the Shanghai Composite Index surged 65 percent. Brokerages rose in mainland trading today amid prospects an expansion of the stock link would boost earnings. Citic Securities Co. climbed 4.2 percent while Haitong Securities Co. gained 3.4 percent.
The design of the stock link is scalable and replicable, and can be expanded to cover other markets or asset classes, Lorraine Chan, a spokeswoman for Hong Kong Exchanges, said in an e-mail on Jan. 5. The bourse operator has “excellent working relationships with the Shenzhen exchange,” and will inform the market if there are material developments, she said.
The State Council hasn’t yet endorsed the link and it will take at least six months to complete preparations after cabinet approval, Caixin said yesterday, citing unidentified people closed to the Shenzhen Stock Exchange.
more serious financial reforms coming. Shenzhen can certainly benefit a lot.
from Bloomberg
Hong Kong is taking steps to increase trading through the Shanghai exchange connect as officials discuss setting up a separate link with Shenzhen.
Shenzhen and Hong Kong will seek regulatory approvals once their plans are “mature,” the mainland city’s stock exchange said in a one-sentence statement on its microblog yesterday. Hong Kong Exchanges & Clearing Ltd. said it will offer new trading accounts to fund managers as soon as March, enabling them to overcome the main hurdle stopping them from selling Shanghai-listed shares. (388) Shares of Hong Kong’s bourse operator rose 1 percent at the close, while mainland brokers rallied.
A trading link with the Shenzhen exchange would allow foreign investors access to some of the nation’s most dynamic private companies in the technology and health-care industries. The ChiNext index of smaller companies, which is listed in Shenzhen, has more than doubled over the past two years as investors speculate they will benefit most from the nation’s move toward an economy driven by domestic consumption rather than investment and exports.
“That’ll be a further step for China’s market to be globalized,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The Shenzhen exchange has a good resource of small caps.”
The Shanghai and Hong Kong stock connect, which started in November amid much fanfare, isn’t generating much interest among investors. Foreign buyers have filled about 25 percent of the quota to buy mainland shares and 6 percent of the quota for Hong Kong stocks, according to data compiled by Bloomberg.
Link Obstacles
One problem is that Chinese regulations compel international investors to deliver securities to their broker before 7:45 a.m. in Hong Kong on the day they plan to sell the shares on the mainland. Many asset managers have compliance rules that prevent them from transferring equities before they have sold the securities.
HKEx will register the new trading accounts with Hong Kong Securities Clearing Co., one of its subsidiaries. That will allow China Stock Connect -- the gateway for investors wanting to trade Shanghai shares -- to verify the money managers’ holdings without forcing them to transfer the equities to a broker, according to a HKEx presentation posted on its website.
The Hong Kong exchange expects to start testing the new system in February before launching it as early as March. Hong Kong’s Securities & Futures Commission needs to approve the project before it can go live.
HKEx Rally
The Hong Kong-Shanghai connect allows foreign investors to purchase aggregate 300 billion yuan ($48.3 billion) of so-called A shares on the Shanghai exchange, while the total quota for the purchase of Hong Kong stocks by mainland investors is 250 billion yuan.
Shares of HKEx have rallied 42 percent over the past year, compared with a 4.3 percent gain for Hong Kong’s Hang Seng Index. The Shenzhen Composite Index has jumped 40 percent, while the Shanghai Composite Index surged 65 percent. Brokerages rose in mainland trading today amid prospects an expansion of the stock link would boost earnings. Citic Securities Co. climbed 4.2 percent while Haitong Securities Co. gained 3.4 percent.
The design of the stock link is scalable and replicable, and can be expanded to cover other markets or asset classes, Lorraine Chan, a spokeswoman for Hong Kong Exchanges, said in an e-mail on Jan. 5. The bourse operator has “excellent working relationships with the Shenzhen exchange,” and will inform the market if there are material developments, she said.
The State Council hasn’t yet endorsed the link and it will take at least six months to complete preparations after cabinet approval, Caixin said yesterday, citing unidentified people closed to the Shenzhen Stock Exchange.
more serious financial reforms coming. Shenzhen can certainly benefit a lot.
