China will commence the Shenzhen-Hong Kong Stock Connect programme on December 5, allowing international investment into previously unavailable stocks, including many sought-after technology companies.
As reported, China announced in August that the move had been given the green light, following on from the previous Shanghai-Hong Kong Stock Connect programme. The launch is another step in China’s plans to liberalise its financial markets and give global investors greater access to Asia’s largest and third-largest equity markets.
The programme will allow overseas investors to trade in 881 stocks on the Shenzhen Stock Exchange, as well as allowing mainland Chinese brokers access to execute transactions in 417 stocks in Hong Kong, according to a joint announcement made by the China Securities Regulatory Commission and Hong Kong’s Securities & Futures Commission.
“The expanded trading link will further strengthen mutual access between the Mainland and Hong Kong stock markets,” SFC chairman Carlson Tong said. “Similar to the arrangements for Shanghai-Hong Kong Stock Connect, the two regulators have established mechanisms to protect the integrity of both markets under Shenzhen-Hong Kong Stock Connect.”
The latest move, starts on the second anniversary of the first Shanghai-Hong Kong Stock Connect programme. Under that first scheme, international investors can trade in about 600 of Shanghai’s A shares, while the city’s brokers got access to 318 Hong Kong stocks for mainland investors.
A daily quota will be imposed on the Shenzhen link on international investors who can trade up to 13 billion yuan (£1.51bn) a day of A-shares in Shenzhen stocks, while mainland investors can trade up to 10.5 billion yuan (£1.2bn) a day of Hong Kong stocks.
The limits are the same as the Shanghai-Hong Kong link, effectively meaning the total amount of cross border trading should double after the launch of the new scheme.
As previously reported, the long expected agreement between the Shenzhen and Hong Kong financial sectors, though welcomed, is unlikely to boost Chinese markets, according to Fidelity Investments.
Raymond Ma, portfolio manager at Fidelity International welcomed the announcement as “positive news”, but also expects that the impact will not be strong enough to drive markets upwards.
“Shenzhen-Hong Kong Stock Connect is likely to further open up investment opportunities and also provide additional market liquidity,” said Ma. “However, as this news has been expected for quite some time, coupled with Shanghai-Hong Kong Stock Connect already being in operation, the news unlikely to be a strong catalyst for the market.”