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Shenzhen-HK technical connect goes online

Reporter: Chen Tong 丨 CCTV.com

11-15-2016 00:35 BJT

The Shenzhen Stock Exchange has given final approval to its system that supports the stock connector between Shenzhen and Hong Kong. The approval paves the way for the official launch of the highly anticipated trading mechanism. Chen Tong has more.

Two years after the Shanghai-Hong Kong Stock Connect project was launched, the technology is now ready and waiting for the countdown to open the system to investors. Domestic traders will get a new way to invest in the Hong Kong market, while international investors will have broader access to mainland-listed stocks. Experts say the Shenzhen-Hong Kong Stock Link will help to ease the current high valuation of mainland A-shares.

"The Shanghai-Hong Kong Stock Connect gives investors access to companies listed in both Shanghai and Hong Kong, shares that were traced by major indices like the Hang Seng Midcap 50 Index. But the Shenzhen-Hong Kong Stock Connect targets smaller companies. That is a good policy to boost for smaller Hong Kong company shares, and it will lower the high valuations of mainland A shares. The connect will break the dam, and the capital flow will lower the high pressure on the A-share markets." said Yang Xiaolei, senior analyst of SWS Research.

The threshold for investors to trade on the Shenzhen-Hong Kong Stock Connect is 500,000 yuan, and investors will be required to score above 90 out 100 in a pre-test about the trading system in Hong Kong. The threhold is the same as on the Shanghai-Hong Kong Connect. But some Shanghai retail investors we talked to are still hesitant about investing via the new Shenzhen-Hong Kong link.

I have been investing with the Shanghai-Hong Kong Connect. I'll wait to see what happens when the Shenzhen-Hong Kong Stock Connect officialy opens.

For people like me, we don't have much investment overseas, so I'm not thinking about investing via the links. It's too complicated and not easy. So I just invest in the local A-shares in Shenzhen and Shanghai.

Yang says we are expected to see more high net worth investors trading on the Shenzhen-Hong Kong Stock Connect as the volatility of the Hong Kong market is risky for small investors.

Yang Xiaolei said "The transaction fees in Hong Kong are comparatively expensive, so it's pointless for investors with financial assets of less than 500,000 yuan. The minimum commission at most Hong Kong local brokerages is 100 yuan per transaction. The Hong Kong market has high volaility and the trading volume is comparatively low. It's not very suitable for lower net worth investors."

The government has not revealed the exact date for the launch of the service. Guosen Securities, Haitong Securities and China Merchant Securities have already started to accept Shenzhen-Hong Kong Stock Connect accounts being opened by retail investors.

Hong Kong officials say the interconnectivity of stock markets between the Chinese mainland and Hong Kong will also further promote Renminbi cross-border flows and therefore strengthen Hong Kong's role as an international financial center and offshore Renminbi hub.

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