Hong Kong Exchanges and Clearing Ltd Chairman Chow Chung-kong (6th L) and Hong Kong Chief Executive Leung Chun-ying (6th R) pose before hitting a gong during the launch ceremony of the Shanghai-Hong Kong Stock Connect in Hong Kong Nov 17, 2014.[Photo/Xinhua]
SHANGHAI — A landmark stock trading link program allowing Hong Kong and Shanghai investors to buy and sell shares on each other’s bourse is officially launched on Nov 17, marking the start of one of China’s most significant moves to further open its capital markets.
Chinese shares opened higher on Nov 17 as the Shanghai-Hong Kong stock connect pilot program debuted.
The benchmark Shanghai Composite Index (SCI) opened at 2,506.86 points, up 28.04 points, or 1.13 percent.
Since the program was officially approved in April, it took more than seven months for it to be launched. The SCI has also risen over 18 percent since April.
The Shenzhen Component Index on Monday opened at 8,358.13, up 31.23 points, or 0.38 percent.
Hong Kong stocks moved up 225.68 points, or 0.94 percent, to open at 24,313.06.
Hong Kong’s Chief Executive Leung Chun-ying welcomed the launch of the pilot program to provide mutual trading access between the Shanghai and Hong Kong stock markets.
Leung said the program will increase the competitiveness of both stock markets and enhance Hong Kong’s status as a major offshore renminbi trading hub.
“It is a breakthrough in the opening up of China’s financial markets and an important milestone in the development of Hong Kong as a unique gateway between the mainland and international investors,” Chairman of the Hong Kong Exchanges and Clearing Limited Chow Chung-kong said at the launching ceremony.
Shanghai Party Chief Han Zheng (R, 5th) and China Securities Regulatory Commission (CSRC) Chairman Xiao Gang (R 4th) hit a gong during the launch ceremony of the Shanghai-Hong Kong Stock Connect in Shanghai, Nov 17, 2014.[Photo/Xinhua]
On the Southbound link, institutional investors and individuals with over 500,000 yuan ($81,421) in their brokerage accounts may trade Hong Kong shares through a broker on the Shanghai stock market; while heading Northbound, Hong Kong investors and international investors with Hong Kong brokerage accounts may trade shares listed on the Shanghai stock market.
The pilot scheme comes with limitations on the total renminbi value of shares that can be traded through the exchanges. For the Northbound link, there is an aggregate cap of 300 billion yuan and 13 billion yuan daily. The aggregate Southbound trading quota is 250 billion yuan and 10.5 billion yuan daily.
According to information by Hong Kong Exchange, the net buy of Northbound stocks reached 8.15 billion yuan ($1.33 billion) by 10 am, accounting for 63 percent of daily quota amount. The remaining daily quota amount of Northbound stocks was 4,823 million yuan, 37 percent of the total.
Trading under stock connect will, initially, be subject to quota restrictions. Overseas investors can only invest a net value of as much as 300 billion yuan ($48.9 billion) in A shares with a daily cap of 13 billion yuan, while mainland investors can only invest a net value of as much as 250 billion yuan in Hong Kong stocks with a daily cap of 10.5 billion yuan. Both quotas apply on a “net buy” basis, which means investors will always be allowed to sell their cross-boundary securities regardless of the quota balance.
There are 568 eligible stocks for Northbound trading, namely constituent stocks of the Shanghai Stock Exchange 180 Index and SSE 380 Index as well as shares that are dual listed in the two bourses (A+H shares). For Southbound, investors will be able to trade 268 eligible stocks, namely constituent stocks of the Hang Seng Composite LargeCap Index and Hang Seng Composite MidCap Index as well as shares that are dual listed in the two bourses (A+H shares).