Stock Connect: 5 years on, how did linking the mainland-Hong Kong exchanges become a success after launching during Occupy Central?
- Programme was launched during Occupy Central protests, then dealt with China market meltdown
- Platform gives mainlanders access to home-grown stars like Tencent, while northbound traders can buy high fliers like Kweichow Moutai
After a rocky start, the Stock Connect is now heralded as a great success, giving mainland Chinese investors access to such home-grown stars as Tencent Holdings and at some point e-commerce giant Alibaba Group Holding while giving Hong Kong and global investors the ability to buy such high fliers as liquor giant Kweichow Moutai.
On Sunday, the programme turned 5 years old. Trading began on the Connect first in the Shanghai and Hong Kong exchanges. Shenzhen joined two years later. In 2017, the Bond Connect was launched.
The Connect had some tough moments early on: It was launched during Hong Kong’s Occupy Central demonstrations, had weak traffic, then suffered through the Chinese market meltdown in 2015, which wiped out US$5 trillion in market cap and raised alarms among foreign investors about the stability of the country’s equities.
In June 2018, global index provider MSCI first included stocks on the mainland’s A-share market in its benchmarks, a huge endorsement that had previously been denied three times. The step is accelerating trading of China’s so-called A shares.
“The introduction of the Connect scheme was a significant breakthrough and marked a major opening up of the mainland capital market. All brokers and investors were excited about the new scheme because we knew it would give the markets a big boost,” said Edmond Hui, chief executive of Bright Smart Securities.
The Connect opened a floodgate into what had been an almost entirely closed off stock market for global investors hoping to profit from China’s economic growth.