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SH-HK link develops steadily for 2 years

Reporter: Li Jiejun 丨 CCTV.com

12-05-2016 16:29 BJT

The Shanghai-Hong Kong stock connect has functioned smoothly since it was launched two years ago. The connect has proven to be a successful cross-border trading model and laid the foundation for the Shenzhen link.

Bright Smart Securities provides services for Hong Kong residents to buy Chinese mainland bonds through the Shanghai-Hong Kong stock connect. The link program was launched in November 2014 and it allows investors from the Chinese mainland and Hong Kong to buy stocks on each side. Bright Smart CEO Edmond Hui says the program has brought the company big opportunities.

"At the beginning, our customers were not used to the trading mechanism and rules. So they didn’t show much interest. But in April 2015, the A-share market performed well, and pushed up the H-shares," he said.

Some 2.26 trillion yuan has been traded through the Northbound channel and 1.49 trillion Hong Kong dollars through the Southbound channel since the program was launched. However, the trade volume may not live up to market expectations. Experts say there are various reasons for that and there’s still room for improvement.

"There are currencies, there are concerns about capital outflows, market volatility. So it takes time for both sides to get used to the market. But we see that each year the trade volume has gone up. From the beginning, it was 2 to 3 percent, and now it’s doubled to about 5 percent to its total turnover," said John C. Lau, MNG. Director Boci Securities LTD.

There has been a strong appetite for more connect schemes since the Shanghai-Hong Kong connect launched. Shenzhen has many more small- and medium-size A-shares that are favored by retail investors. Observers say the launch of the Shenzhen connect will help boost market sentiment.

"The SH-HK connect program is a big step in China’s capital liberalization. It has proceeded very smoothly in the past years in terms of settlement foreign exchanges and transactions," said Zhang Wenlang, Chief Analyst Everbright Securities Co., LTD.

"It laid a very good foundation for the opening of the SH-HK stock connect . This would further help integration of the two markets in the Chinese mainland and Hong Kong."

Analysts say the stock connect is a catalyst and model for future capital market development. Cross-border regulations and law enforcement will be strengthened to ensure success.

The two-year operation of the Shanghai-Hong Kong stock connect made the cross-border exchange scheme a success. And the launch of the Shenzhen-Hong Kong link will be another key step for the internationalization of China’s capital market.

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