Mainland investors are likely to be able to invest in more stocks through the forthcoming Shenzhen-Hong Kong Stock Connect than they can through the scheme that now links the Shanghai and Hong Kong exchanges.
Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing Ltd (HKEx) (00388.HK), said Tuesday: “I’m almost certain that we will consider enlarging the [number of] eligible stocks to be included in southbound trading from Shenzhen. But exactly how much we are going to enlarge it, we are still trying to work out.”
Li said the second half of the year would be a realistic time for the new scheme to be launched.
“The initial launch may not include different securities like ETFs and bonds … but it is completely envisioned that after not too long, all cash equities or cash products will be included in southbound trading,” he said.
But Li did not say whether the range of eligible stocks in the Shanghai-Hong Kong scheme will be enlarged when the link with Shenzhen is launched, so that the two programs will be synchronized.
At present, mainland investors can invest in 268 stocks listed in Hong Kong through Shanghai-Hong Kong Stock Connect, while Hong Kong and international investors can invest in 568 stocks listed in Shanghai.
Shenzhen-Hong Kong Stock Connect will boost the chances of A shares being included in the MSCI Emerging Markets Index, which will help attract more institutional investors, Li said.
“It may be quite an important year for the inclusion [of A shares] in the MSCI index,” he said.
“What reason will they have for not including A shares in the MSCI Emerging Markets Index after the launch of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect?”
He said the mutual recognition mechanism will first be expanded to equity derivatives, while commodities, fixed income and currencies are also areas that are being explored.
“This is the beginning of a long process, the beginning of building an ecosystem … of mutual market access. We’re now adding Shenzhen, adding derivatives, so the adding and the improving are all going to be happening together in parallel,” Li said.
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