Stock exchange chief reveals plan to accelerate ‘through train’ trading scheme
Shanghai-Hong Kong Stock Connect to expand number of shares and boost trading quotas, HKEx chief Charles Li says
The mainland and local bourses are reviewing a proposal to lift the total quota, cut down market holidays and add more stocks to be traded under the Shanghai-Hong Kong cross border trading scheme, Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said on Tuesday.
Li also said in the exchange’s annual media lunch that he has been lobbying Beijing to launch cross border financial derivatives this year to allow investors to hedge their risks under the stock market connect plan.
Li said more reforms will be carried out when the Hong Kong and Shenzhen stock markets link up later this year in a bid to boost trading. This would include a plan to add more Hong Kong stocks for mainlanders to trade in, up from the current 273. Brokers believe mainlanders will be more keen if they can trade more of the 1,558 main board listed and 205 Growth Enterprise Market listed Hong Kong company shares.
They will also prune some of the 28 days lost to holidays in either city when trading under the scheme is suspended.
“We will not open during all holidays as that would add costs for brokers. No brokers would like to work during Christmas even if mainland markets are open during Christmas. But we can cut down some days of closures such as Christmas eve, or New Year’s eve if we can sort out the bank settlement issues,” he said.
He said the next products for cross border trading products would be the licensing of derivative futures for each exchange which he hopes could happen this year. Other products to be added to the cross border mix would be commodities, fixed income products and international companies.
International investors have bought a total of 100.62 billion yuan (HK$126.73 billion) of Shanghai-listed A-shares through HKEx under the scheme at the end of business in Shanghai on Tuesday. The balance now stands at 199.38 billion yuan. This means one-third of the total quota has been used up and brokers fret it would be completely used up and this would lead to a suspension of the scheme in a few months.
Li played down those worries.
“The quota is big and has not yet been used up. Even if the aggregated quota would be close to being used up, it would be easily to adjust the quota. I do not believe the stock through train scheme would be suspended due to the quota issue. The market should have confidence,” Li said.
The scheme began on November 17. It allows Hong Kong and international investors to trade a total of 300 billion yuan or 13 billion yuan a day in Shanghai stocks, while the mainlanders can trade a total of 250 billion yuan or 10.5 billion yuan a day in Hong Kong listed stocks.
The trading pattern has been lopsided with investors piling into to trade the A-shares in Shanghai, while the mainlanders have only invested 23.8 billion yuan in Hong Kong stocks via the southbound trading route at the close of trade on Tuesday. This represents only 9.5 per cent of the total quota.
HKEx chief regulatory officer and head of listing David Graham said the exchange was reviewing the comments submitted in the consultation that ended in November whether Hong Kong should introduce dual class shares structure.
