Dual tranche-dual counter model could boost Stock Connect

January 05, 2015 10:09
Firms coming to the market should list their shares simultaneously in Hong Kong and Shanghai, Pamela Chung says. Photo: HKEJ

A dual tranche-dual counter model could solve the inherent foreign exchange risks in the Shanghai-Hong Kong Stock Connect system, the Hong Kong Economic Journal reported Monday.

It cited a proposal by Pamela Chung, managing director at Computershare Hong Kong Investor Services Ltd., in an interview.

Under the scheme, a company would list a tranche of shares each on the Hong Kong and Shanghai markets, tradable in the local currency.

At present, mainland investors must exchange their renminbi into Hong Kong dollars to buy shares listed in the city, then change the balance upon disposal of the shares back into the Chinese currency, incurring additional costs.

"If the stock through train can be extended to initial public offerings by a dual tranche-dual counter model that allows the stocks to be traded in the local currency, the exchange costs and currency risks can be resolved," Chung said.

This would give a big push to the Hong Kong IPO market and a way out for dual-listed companies that plan to spin off and float subsidiaries on the Hong Kong stock market, she said.

The city's IPO market has been lackluster in terms of the number of subscribers for single issuances.

The biggest recent IPO, by CGN Power Co Ltd. (01816.HK), attracted more than 140,000 individual subscribers, a small fraction of the more than 900,000 that signed up when Industrial and Commercial Bank of China Ltd. (01398.HK) and Bank of China Ltd. (03988.HK) were listed.

--Contact us at [email protected]


Freelance journalist