Benefits of including new tech board firms in stock link

March 13, 2019 10:41
HKEx chief Charles Li is said to be pushing mainland regulators to include the new Shanghai tech board into the Stock Connect scheme. Photo: HKEJ

China's new tech board is set to become a reality this year, as preparations are underway in full swing for its launch.

Since this new science and technology innovation board is considered a flagship project, regulators are set to carefully pick the best startups for listing on the new board and ensure the IPOs are priced reasonable enough to leave ample room for appreciation.

Hong Kong investors are keen to capitalize on the mainland's new board.

Charles Li, chief executive officer of Hong Kong Exchanges and Clearing, is trying to persuade mainland regulators to include the tech board into the Stock Connect scheme. The process might take some time, but inclusion is bound to happen sooner of later given the benefits it will bring.

For one, mainland Chinese investors are showing mixed response towards the new tech board. They certainly welcome the new board; but they are concerned that the new board may drain massive capital as it will increase the supply of equities.

Stock connect can bring international demand and fresh liquidity into the new tech board and ease such concerns.

Meanwhile, there should be no technical difficulty in theory. Li highlighted that authorities have already left room for including the new tech board into the Stock Connect scheme. It won’t be necessary to make any major changes.

Putting the new tech board shares under the stock link program will also demonstrate Beijing’s resolve to further open up the capital market to international players.

The Shanghai Stock Exchange has begun accepting applications from potential candidates for listing on the new tech board, which may officially kick off in the third quarter.

Li said he has yet to discuss the inclusion matter with the authorities. Yet, the Hong Kong stock exchange chief is aggressively making his voice heard during the annual "Two Sessions" political meetings in Beijing to get things going.

This article appeared in the Hong Kong Economic Journal on March 12

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist