Investors won’t be able to sell Shanghai shares through an exchange link with Hong Kong unless they transfer the stock to a broker before trading starts that day, Bloomberg News reported, citing Hong Kong Exchanges & Clearing Ltd. (00388.HK) chief executive Charles Li.
Clarifying the Hong Kong-Shanghai exchange link announced in April, Li wrote in a blog on Sunday that shares must be transferred prior to 7:30 a.m. if investors want to execute the trades. This will allow the two exchanges to settle the trades in compliance with mainland Chinese rules, he said.
The exchange link, expected to open on Oct. 13, will give foreigners unprecedented access to China’s US$3.6 trillion stock market, while giving wealthy Chinese investors a route to buy Hong Kong stocks, the report said. Maximum daily cross-border trading has been set at 23.5 billion yuan (YS$3.8 billion).
Li acknowledged that the system will not be “perfect”, but said the country needs the scheme to progress.
“If we wait for the mainland market to align with Hong Kong’s, we could be waiting a decade or longer,” Li said. “While we have managed to find a solution to most of the challenges of aligning two very different markets, some of the differences were so significant that our solutions will inevitably constrain the market.”
The rule on sell orders is more restrictive than the so-called T+2 settlement system used in Hong Kong and other major stock markets, which allows investors to buy and sell shares without transferring cash or the securities before the trades, according to the news agency.
The exchange link will only operate on days where trading and clearing arrangements are open in both Shanghai and Hong Kong, while investors will be protected by regulators of the market in which they’re buying stocks, Li said.
Investors in yuan shares will be overseen by the China Securities Regulatory Commission, while mainland buyers of Hong Kong-listed equities will be under the scope of the city’s Securities and Futures Commission, he added.
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