The Shanghai-Hong Kong Stock Connect

From MarketsWiki
Jump to navigation Jump to search
HKEX 728x90 v6.gif

Stock Connect is a pilot program that links the Shanghai Stock Exchange and the Hong Kong Exchanges and Clearing Ltd, allowing residents of mainland China to trade shares in Hong Kong for the first time and foreigners to invest in Chinese companies, many of which had been off limits. Trading on Stock Connect began on Monday, November 17, 2014. Foreign investors had been largely shut out of China's financial markets, able only to trade the stocks of certain companies listed in China through a limited program.[1] Even with Stock Connect, foreign investors are still only allowed to trade $2.1 billion daily, a small percentage of the Shanghai stock exchange market capitalization.

On the first day of trading via Stock Connect, traders exhausted the daily limit for buying Shanghai stocks by mid-afternoon.[2] Mainland investors had less of an appetite for the big Chinese and Western companies, however.[3]

Stock Connect was first announced by Premier Li Keqiang of China in April 2014.

The program created a single China stock market that is one of the world's three largest by market cap and daily turnover. It added more than 800 companies of more than $1 billion market cap to the roster of stocks available to international investors.[4]

Charles Li, then chief executive of HKEx, said the plan for the Stock Connect trading link was "to gradually expand mutual market access in an orderly manner" and that the link had the potential to be extended to other products and asset classes, including equity derivatives, commodities, fixed income and currencies.[5]

In May 2022, Hong Kong and mainland Chinese regulators announced that they had come to an agreement for the long-awaited inclusion of exchange traded funds into the Stock Connect program. The inclusion will mean investors at the Hong Kong and Shanghai stock exchanges will be able to trade eligible ETFs on each other’s exchanges.[6]

In December 2022, Hong Kong Exchanges and Clearing reached an agreement with the Shanghai Stock Exchange, Shenzhen Stock Exchange and China Securities Depository and Clearing Corporation Limited to expand the scope of eligible stocks under Stock Connect.[7] [8]