Majority of small brokers in Hong Kong not interested in joining Shenzhen stock connect
High upgrade costs, limited demand from local investors seen as contributory factors for lukewarm response to proposed trading link
More than half of small brokers in Hong Kong are still reluctant to join the Shenzhen-Hong Kong stock connect due to high establishment costs and limited interest from local retail investors.
Hong Kong Exchanges and Clearing, the operator of the trading link, is yet announce the number of participants in the trading link, which by latest indications could debut as early as November.
Among the about 450 local brokerage houses in Hong Kong, only 135 brokers are on board with the cross-border trading plan that enables trading in Shanghai-listed A-shares, according to HKEX data. In addition, about 70 are signed up as brokers who trade through those 135 brokers with direct cross-border access.
Still the total accounts for just 205 brokers, or about 45 per cent of all the brokers trading for international investors in the Shanghai and Hong Kong stock connect even after the scheme was started in November 2014.
Benny Mau, chairman of Hong Kong Securities Association, expects the number of local brokers participating in the upcoming Shenzhen trading link to be the same as the Shanghai and Hong Kong stock connect.
Like many other local brokers, I do not think there is a need to join the Shenzhen and Hong Kong stock connect from day one
“Brokers had to spend an additional HK$300,000 to HK$400,000 to install and update their trading facilities for the Shanghai-Hong Kong stock connect. They may incur the same charges for the Shenzhen trading link,” Mau said.