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Stock Connect

Shenzhen-Hong Kong Stock Connect strengthens city’s ‘super-connector’ role, says Chief Executive CY Leung

HKEX chief executive Charles Li Xiaojia says new cross-border trading scheme marks another milestone for mutual market access

PUBLISHED : Monday, 05 December, 2016, 10:01am
UPDATED : Monday, 05 December, 2016, 11:35pm

The new share trading link between Shenzhen and Hong Kong is being heralded as a milestone that will strengthen Hong Kong’s role as a “super-connector” between China and the world – and the local bourses say there may be more connect schemes to come.

But the fanfare surrounding the launch is yet to translate into all-round success for the scheme, which saw muted trading during its Monday debut, using up only 21 per cent of its daily northbound quota.

When the Shanghai-Hong Kong Stock Connect launched in November 2014, the daily quota of northbound stocks was used up within hours of its opening.

The new Shenzhen connect also failed to bolster the Hang Seng Index, which slipped 0.26 per cent on Monday due to volatility in the overseas markets.

The share trading scheme, which links China’s southern most stock exchange to Hong Kong’s bourse, kicked off with a grand ceremony on Monday morning, attended by nearly 600 guests including government officials, regulators and top executives from the exchange.

Hong Kong’s Chief Executive Leung Chun-ying said the new connect would bring Shenzhen and Hong Kong closer and allow international investors to buy Shenzhen stocks.

“This will strengthen Hong Kong as a super-connector between the world and the mainland,” he said at the ceremony.

“This will also enhance Hong Kong’s role as an offshore yuan trading hub.”

Watch: Hong Kong-Shenzhen share trading link launches

The new connect scheme is another milestone for mutual market access following the Shanghai-Hong Kong Connect’s launch two years ago, Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said at the launch ceremony.

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

The HKEX would continue to explore new types of connect schemes to develop other new mutual market access points with the mainland markets, the exchange’s chairman Chow Chung Kong said.

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

The Shenzhen-Hong Kong Stock Connect allows 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.

This will give more choices for investors and strengthen Hong Kong as an international financial centre
Chow Chung Kong, chairman, HKEX

The exchange saw 2.67 billion yuan worth of northbound trading from international investors buying Shenzhen stocks and HK$923 million of southbound by mainlanders buy into Hong Kong stocks trades by the end of day.

The levels were much lower than the volumes on the Shanghai-Hong Kong Stock Connect, which saw 6.80 billion yuan in northbound trades and HK$4.43 billion in southbound trades on Monday.

Credit Suisse’s vice chairman and head of equities for Greater China, Nicole Yuen, said the connect was off to a “good start” although it was hardly a “landslide of funds pouring into either markets”.

She expected volumes to pick up in future, and highlighted that the most important aspect was not fund flows, but how the landmark opening allowed international investors to buy into the “new economy of China”.

“We are seeing history being made,” Yuen said.

But she said investment appetite still remains muted due to uncertainties overseas, including the election of Donald Trump, the Italian referendum result and Brexit, which translated into what was a reserved start for the new connect.

The new connect scheme was initially expected to be launched at the end of last year but was postponed after mainland stock markets suffered a harsh sell-off.