The upcoming Shenzhen-Hong Kong Stock Connect could feature more firms from high-tech and emerging industries, compared to the existing cross-border trading program involving the Shanghai bourse.
Eligible companies listed on the Small and Medium Enterprise Board and those on ChiNext, the board for growth enterprises on the Shenzhen bourse, are likely to be selected for the new cross-border stock investment program, the Hong Kong Economic Journal reported Monday.
The design of the scheme has been completed, and only some approvals are needed from authorities on both sides, the report said, citing Song Liping, general manager of the Shenzhen bourse.
Related system development and testing with market participants will soon be underway. Officials hope to launch the program in the second half of 2015 if authorities give the green light before June.
Song says the proposed inclusion of stocks on ChiNext and SME board will benefit cross-border players, given the firms’ growth potential and a relatively large and stable base of institutional and long-term investors.
Selection criteria will include the market capitalization, earnings and potential transaction volumes, among others, according to Song.
Analysts believe the upcoming bourse linkage will result in more northbound fund flows rather than southbound, similar to what has been seen under the Shanghai-Hong Kong Stock Connect.
Northbound flows refer to funds flowing from Hong Kong into the mainland, while southbound flows pertain to investments in the opposite direction.
China Securities Regulatory Commission chairman Xiao Gang said recently that the Shenzhen-HK Stock Connect scheme may get the go-ahead in the first half of the year and kick off in the second half.
This article appeared in the Hong Kong Economic Journal on March 9. [Click here]
Translation by Vey Wong
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