Shanghai-Hong Kong Stock Connect is born
Wall Street Journal10.11.2014Read original
This agreement marks the start of one of China’s most significant moves to open its stock market in years and putting to rest market fears that the scheme was set for lengthy delays. The financial market’s new global headquarters is born.
China is set to open up Shanghai’s stock market to investors overseas, granting access to invest in an estimated US$2 trillion of mainland equities, with the launch of a trading link between Hong Kong and Shanghai on Nov. 17.
“The necessary trading and clearing rules and other relevant rules, the daily and aggregate quota mechanisms and other regulatory and operational arrangements have now been finalized,” the China Securities Regulatory Commission and the Securities and Futures Commission of Hong Kong said in a statement.[…]
The launch comes at a time when China is seeking a larger role on the global stage, using the Asia-Pacific Economic Cooperation summit to announce billions of dollars of regional investments in the presence of world leaders including U.S. President Barack Obama and Russian President Vladimir Putin.
The Shanghai-Hong Kong Stock Connect program will allow all types of investors to buy shares on the Shanghai Stock Exchange, while also letting wealthy investors in mainland China to buy stocks listed in Hong Kong.
Previously, only hand-picked fund managers were able to invest in Chinese markets through a quota system capped at a total of $105 billion, but with the launch of the link, any investor that can buy Hong Kong stocks can also buy into the Chinese companies that are a part of the program.
Unlike China, Hong Kong’s capital markets are open to any foreign investor, and anyone with a brokerage account globally can access the city’s stocks. The link will allow the average retail investor in the U.S. or the U.K. to buy into the Shanghai-listed blue chips that form a part of this link, in sectors such as healthcare, industrial materials and consumer staples that aren’t easily accessible at present.[…]
UBS estimates that the link opens up an additional $2 trillion of investment options from the current system of access to China’s blue chips – where institutional investors from fund managers to banks have pre-set quotas.
If the scheme is expanded to Shenzhen Stock Exchange as many banks anticipate, China’s combined exchanges would form the biggest stock market in the world outside of the U.S. China has two stock exchanges — Shanghai, the bigger of the two, and Shenzhen.