China kicks off Shenzhen-Hong Kong Stock Connect

A long-delayed stock-trading link between the Chinese city of Shenzhen and Hong Kong was launched today, another step in China’s efforts to open up its market and enable foreigners to trade shares in over 800 firms.

The Shenzhen-Hong Kong Stock Connect, the second link between mainland China and Hong Kong bourses, was supposed to launch at the end of last year, but was delayed due to Chinese market volatility.

Ceremonies were held simultaneously today at Hong Kong and Shenzhen bourses via video link as Hong Kong Exchanges and Clearing Chairman Chow Chung-kong and Hong Kong Chief Executive Leung Chun-ying jointly beat a gong to mark the launch.

This is the second link of its kind to boost the opening up of mainland’s capital market after a similar link between the Shanghai and Hong Kong bourses was launched in 2014.

The new scheme is aimed at giving global investors stocks in the tech-heavy Shenzhen market via Hong Kong bourse, state run- Xinhua news agency reported.

Leung said at the ceremony that the launch indicated the interconnection between capital markets in Hong Kong and Shenzhen “has entered a new stage’’.

Following the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect will bring more opportunities for both institutional and individual investors in the two bourses, with the advantages of Hong Kong’s “one country, two systems” formula, he said.

The link was to have been launched last year, but was put off due market volatility in China.

Shenzhen has been promoted as a hub for technology and its stock market has been linked to the US-based Nasdaq.

With a monthly turnover of more than $one trillion, Shenzhen is regarded as Asia’s busiest exchange as per the World Federation of Exchanges data.

This is also part of China’s efforts to to open up its $6.5 trillion equity markets to foreign investors.

Just after the start of trading, 193 million yuan worth of northbound trades were made, while 108 million yuan worth of southbound trades were recorded, Hong Kong based South China Morning Post reported.

However, the Shenzhen-Hong Kong debut had a more subdued start than the Shanghai connect scheme, which saw 50 per cent higher volumes during its launch on November 17, 2014, it said.

The new connect scheme is another milestone for mutual market access, Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said at the launch ceremony.

“If Shanghai-Hong Kong Stock Connect is a baby step, the Shenzhen-Hong Kong is the second step. Now we can walk, and then we can run,” Li said.

Hong Kong’s Chief Executive Leung Chun-ying said the new connect included Shenzhen stocks for international investors, while expanding the list of Hong Kong stocks available for mainlanders to invest in.

“This will strengthen Hong Kong as a super-connector between the world and the mainland. This will also enhance Hong Kong’s role as an offshore yuan trading hub. After the Shenzhen-Hong Kong stock connect is working smoothly, it will expand to add ETF products,” Leung said.

HKEX chairman Chow Chung Kong said the Shenzhen Hong Kong connect was opening mainland markets to the world.

“We will continue to explore new types of connect schemes to develop other new mutual market access [points] with the mainland markets,” Chow said.

“This will give more choices for investors and strengthen Hong Kong as an international financial centre.”

The Shenzhen-Hong Kong Stock Connect will allow international investors to trade 881 Shenzhen-listed stocks up to quota of 13 billion yuan a day, while mainlanders will be able to trade 417 Hong Kong-listed stocks, up to a daily quota of 10.5 billion yuan.

Louis Tse Ming-kwong, director of VC Brokerage, expects there to be more southbound trading than northbound trading via the new connect scheme due to the weak yuan.

“Two years on, the yuan has fallen more than 10 per cent against the US dollar and many mainlanders in recent months have bought Hong Kong stocks via the Shanghai and Hong Kong stock connect. As the yuan is expected to fall further, we are going to see more mainlanders buying Hong Kong stocks on Monday than international investors buying stocks in Shenzhen,” Tse told Post.

Helen Wong, chief executive of Greater China, HSBC, said the new link between Shenzhen and Hong Kong would offer global investors exposure to a broader spectrum of Chinese equities and give mainland investors more choices in Hong Kong.

“The Pearl River Delta and specifically Shenzhen have become China’s ‘Silicon Delta’ — a world-renowned hub for technology and innovation. Enhanced access to the Shenzhen market gives investors around the world a new opportunity to invest in many of the dynamic companies based in the region that are driving China’s economic transition,” Wong said.

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