Across The Border | Shenzhen-Hong Kong Stock Connect to see warmer investor response if yuan stabilises
More mainland capital has flowed south to Hong Kong than north, with annual southbound fund flows expected to reach between 200 billion to 400 billion yuan
Since its launch on December 5, the Shenzhen-Hong Kong Stock Connect has seen a relatively lacklustre response from investors compared with the Shanghai-Hong Kong Stock Connect, but analysts expect trading volumes to pick up later this year if the yuan stabilises and concerns ease about China’s economy.
The Shenzhen-Hong Kong Stock Connect (SZ Connect), which allows individual investors from overseas to directly buy stocks in Shenzhen and vice versa, had a slow start in December.
Statistics from Hong Kong Exchanges and Clearing showed that only 7 per cent of the northbound daily quota, which was set at 13 billion yuan, was used in the first month after its launch. In the meantime, only 4 per cent of the southbound daily quota, which was set at 10.5 billion yuan, was used.
In contrast, the Shanghai-Hong Kong Stock Connect (SH Connect), a similar scheme that allows direct cross-border stock trading, saw a daily average of 12 per cent of the northbound daily quota used in December.
According to the latest statistics, as of January 20, 843 million yuan or 7 per cent of the SZ Connect’s northbound daily quota was used, still lower than the 8 per cent used in the northbound quota under the SH Connect.
Investors were also less enthusiastic over the start of SZ Connect compared with when SH Connect kicked off in November 2014. In the first month after the SH Connect’s launch, about 25 per cent of northbound daily quota was used on average, and 5 per cent of southbound daily quota was used.