Date
18 October 2017
First Day Of Trading Of The Lunar New Year at The Hong Kong Stock Exchange (HKEx)

The Big Picture: BOURSE LINKAGE

Hong Kong Exchanges and Clearing Ltd. (HKEx) (00388.HK) said on Wednesday that it has been in discussions with its mainland Chinese counterparts over potential mutual market connectivity initiatives between the mainland and Hong Kong bourses. 

It said it has noted media reports regarding the possible establishment of connectivity between HKEx and the Shanghai Stock Exchange.

The local bourse operator said in a filing that no agreement has been signed and that there is no guarantee that a deal on mutual market connectivity will eventually be reached. It said it will make a further announcement when appropriate.

HKEx shares, which were suspended Wednesday afternoon, will resume trade on Thursday following the announcement.

Speculation about a deal and closer ties with the Shanghai Stock Exchange led to a 5.4 percent surge in HKEx shares before trading was suspended at 3:12 pm on Wednesday. It was the best performing blue chip on the day, and helped the market’s benchmark Hang Seng Index gain for the fourth straight trading session.

The 21st Century Business Herald reported earlier that the bourse operators are setting up a two-way system to gather equities transaction instructions that will enable cross-border market access for individual investors. Foreign investors will be able to buy mainland-listed stocks directly through the Hong Kong exchange, while mainland investors will be able to access overseas markets though the Shanghai bourse, with the orders executed by HKEx, according to the report.

The potential linkage between Hong Kong and Shanghai bourses will definitely be very good news to investors on both sides, who are now relying on qualified domestic institutional investor (QDII) and qualified foreign institutional investor (QFII) programs to buy shares in each other’s markets, observers say. It will also be a big step for China on the path towards opening its capital account.

That said, it appears that the discussions remain at a preliminary stage and may not reach a conclusion soon as the issue involves a large amount of cross-border capital flow between Hong Kong and the mainland. The decision, which requires the approval of the China Security Regulatory Commission and the State Administration of Foreign Exchange, is likely to take several months.

–Contact HKEJ at [email protected]

JP/RC

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