World Economy

HK, Shanghai Stock Link Set for Launch

HK, Shanghai Stock Link Set for LaunchHK, Shanghai Stock Link Set for Launch

A trading link between Hong Kong and Shanghai’s stock exchanges will start on Nov 17 after weeks of delays, the Hong Kong exchange announced on Monday (Nov 10), in a move that is expected to lead to billions of dollars in daily transactions.

The Hong Kong Monetary Authority described the “Shanghai-Hong Kong Stock Connect”, which is seen as a key step towards greater financial liberalization in China’s economy, as a “milestone”, Channel NewsAsia reported.

“The SFC and the CSRC jointly announced today that the launch of Shanghai-Hong Kong Stock Connect on Nov 17, 2014 has been approved,” a statement issued by the Hong Kong Stock Exchange (HKEX) said. The exchange said it “welcomes today’s announcement”.

The SFC is Hong Kong’s Securities and Futures Commission (SFC), and the CSRC is the China Securities Regulatory Commission. The platform – which was expected to be launched last month before being delayed – will allow international investors to trade selected stocks on Shanghai’s tightly restricted exchange and let mainland investors buy shares in Hong Kong. It is thought up to $3.8 billion in cross-border trades will be carried out each day.

“This marks an important milestone in the liberalization of the mainland’s capital account,” said Norman Chan, chief executive of the Hong Kong Monetary Authority. It would also “propel the development of offshore renminbi business in Hong Kong to new heights”, he added.

The news was roundly cheered by investors, with Hong Kong shares ending the morning session 1.65 percent higher while Shanghai added 1.18 percent. The venture is expected to see volumes on both exchanges rise significantly, particularly Shanghai, but is subject to strict limits in order to preserve capital controls in China, where authorities keep a tight grip on the yuan currency.

  Big Step

Sam Lau, chairman of investment firm HeungKong Financial, said he expected the move to lead to his company’s profits doubling. “For our company, we do both Hong Kong onshore and offshore equities investment,” he said, speaking on the sidelines of an Asia-Pacific Economic Cooperation (APEC) business meeting in Beijing.

“There are many stocks that you can buy in Hong Kong – they’re really great companies but they’re not listed in China, they’re listed in Hong Kong. In China, those big stocks will be securities firms, those will be benefiting as well,” Lau added.

Analysts said the link-up would boost market confidence and was a “big step” in the opening up of China’s yuan-denominated domestic market – known as the A-share market.