New | HK-Shanghai through train tweak expected to boost foreign investors' interest
Solution to ease concerns over the pre-trade checking requirement expected to encourage institutional investors take more active role
More large institutional investors in developed markets are expected to take a more active role in the Hong Kong-Shanghai stock connect programme, after the market participants launched a new solution to ease concerns over the pre-trade checking requirement.
The Hong Kong stock exchange rolled out the special segregated account system (SPSA) on Monday at a time when turnover of the stock market has turned robust since the stock through-train scheme was launched in November last year.
Under the revised scheme, investors and institutions can now set up their own SPSA account number that is dedicated to their portfolio and their ownership under their custodian bank, using the unique account to communicate with their services providers like custodians and execution brokers.
“The unique account is completely recognised and utilised by the custody and execution brokers,” Yoo Tae Seok, head of fixed income currency development and client business development at HKEx, said in a briefing yesterday. He expects a wider range of investors will participate in the stock-connect programme after responding to the market demand.
Three of 10 of the largest investment firms in Hong Kong have traded mainland stocks through the stock connect, according to a December survey conducted by the Hong Kong Investment Funds Association (HKIFA), highlighting investors concerns over the pre-trade system that might potentially expose price sensitive information because investors need to move their shares a day before selling the stocks.
The survey, the first of its kind that tracked 41 of the biggest fund houses that manage US$20 trillion globally, showed international big players were in no rush to use the scheme to invest in the mainland, with 65 per cent of the responding members pointing to the pre-trade checking as one of the major problems after beneficial ownership.
“The SPSA model enables managers to use multiple execution brokers anytime and is conducive to best execution,” said HKIFA chief executive Sally Wong.