Stock Connect

CSRC’s official says Shenzhen-Hong Kong Connect will start in late November

PUBLISHED : Tuesday, 30 August, 2016, 6:55pm
UPDATED : Tuesday, 30 August, 2016, 6:55pm

China’s securities regulator will implement the much-anticipated Shenzhen-Hong Kong Stock Connect programme by the middle or final week of November, allowing overseas investors to own yuan-denominated shares on the Shenzhen bourse, and letting more Chinese own Hong Kong shares.

Technical preparation for the programme is underway, said Qi Bin, the China Securities Regulatory Commission’s international cooperation director Qi Bin said at a media briefing in Beijing.

The imminent programme raises the prospect that shares on the two bourses could close the gap in their valuations, as Chinese capital seek out cheaper stocks in Hong Kong.

The Hang Seng China A-H Premium Index, which tracks the average price difference of A shares over H shares for the largest and most liquid Chinese companies with dual listings, stood at 124.23 per cent on Tuesday.

Qi said the Stocks Connect programme won’t narrow the prices between stocks traded on the two exchanges.

“You can’t simply compare the two markets because they have different investors base, liquidity pools and pricing mechanism,” Qi said.

A simplistic comparison between the valuations of startups on the Shenzhen stock exchange and their international competitors is misleading because of their different businesses and growth prospects.

“In the medium and long term, their valuation are dependent on China’s economic growth outlook and investors’ outlook,” Qi said. “Shenzhen-Hong Kong connect is a factor, but not a decisive factor.”

Qi was appointed this month as a vice general manager of China Investment Corp., the country’s sovereign wealth manager.