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Shanghai-HK Stock Link Commences Operation

Shanghai-HK Stock Link Commences OperationShanghai-HK Stock Link Commences Operation

Gongs were struck in the Shanghai and Hong Kong bourses to mark the historic start of the Shanghai-Hong Kong Stock Connect program on Monday.

The initiative is a landmark trading link program allowing investors to trade on both bourses. It has been seen as a significant move toward a more open capital market in the Chinese mainland, Xinhua reported.

The much-anticipated launch is expected to see billions of dollars in daily cross-border transactions.

Under the whole program, which caps cross-border investment at 550 billion yuan ($90 billion), investors, with over 500,000 yuan in their brokerage accounts, will be allowed to trade eligible shares listed on either market through local securities firms or brokers.

“Today we are going to witness history,” said C.K. Chow, the chairman of stock exchange operator Hong Kong Exchanges and Clearing, at the opening ceremony. “It is a breakthrough in the opening up of China’s financial markets and an important milestone in the development of Hong Kong as a unique gateway between the mainland and international investors.”

  Investment

Each day, investors are permitted to buy and sell up to 23.5 billion yuan worth of stock from a select list of companies. Up to 10.5 billion yuan of that daily quota goes to mainland investors and the rest to Hong Kong.

Previously, cross-border investment in the mainland equity market was only allowed under a series of projects including qualified domestic institutional investor (QDII), qualified foreign institutional investor (QFII) and RMB qualified foreign institutional investor (RQFII).

To overcome a major block in the stock connect program, the Finance Ministry and its securities watchdog on Friday decided to exempt profits made from the connect program from taxes from its launch until Nov. 16, 2017.

  Innovation

At the launch ceremony in Shanghai, China Securities Regulatory Commission (CSRC) chairman Xiao Gang hailed the trading link program as a “major institutional innovation” in capital markets. He said that “China’s capital markets now face historic opportunities.”

The link heralds a new model – whereby operation is convenient and risks controllable – for cross-border securities investment,” Xiao said.

The connect program is conducive to “consolidating the role of Hong Kong as an international financial center”, and “speeding up the building of Shanghai as an international financial center” so as to raise the competitiveness of China’s overall capital market, Xiao said.

It is also “conducive to the internationalization of RMB and boosting the convertibility in cross-border capital and financial transaction,” he added.

  Stocks Rise

Chinese shares opened higher on Monday as the Shanghai-Hong Kong stock connect pilot program debuted.

The benchmark Shanghai Composite Index (CSI) opened at 2,506.86 points, up 28.04 points, or 1.13 percent.

Since the program was officially approved in April, it took more than seven months for it to be launched. The SCI has also risen over 18 percent since April.

The Shenzhen Component Index on Monday opened at 8,358.13, up 31.23 points, or 0.38 percent.

Financialtribune.com