Date
23 November 2017
A cross-border individual equity investment program is expected to boost demand for stocks denominated in the Chinese currency. Photo: Bloomberg
A cross-border individual equity investment program is expected to boost demand for stocks denominated in the Chinese currency. Photo: Bloomberg

Shanghai-HK bourse link seen boosting RMB business

Renminbi-related business will get a boost from the upcoming “through-train” that will allow cross-border stock trading by individual investors in Hong Kong and Shanghai, according to a senior executive at J.P. Morgan.

Linkage between Shanghai and Hong Kong bourses — the so-called Shanghai-Hong Kong Stock Connect — will drive demand for equities denominated in the Chinese currency, David Lau, managing director and co-head of China corporate finance at J.P. Morgan Securities (Asia Pacific), told the Hong Kong Economic Journal.

The launch of the stock connect scheme may have long-term influence on the securities markets, he said, adding that the influence could be as significant as the introduction of H shares many years ago.

Eligible counters, which cover 266 stocks in Hong Kong, may issue renminbi shares once it is allowed in the secondary market, Lau said, noting a previous initiative from Hopewell Highway Infrastructure Ltd. (00737.HK).

Since the first initial public offering of renminbi denominated shares by Hui Xian Real Estate Investment Trust (87001.HK) in April 2011, Hong Kong has seen the launch of a slew of products traded in the Chinese currency.

These products include exchange traded funds such as ChinaAMC CSI 300 Index ETF (83188.HK), and other renminbi-denominated warrants. Yet, they still have a way to go before they become mainstream.

Given a fivefold velocity of liquidity in the mainland market as compared with Hong Kong, southbound transactions under the stock connect scheme are likely to outrun northbound, inevitably stimulating demand for stocks denominated in the Chinese currency, Lau said.

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