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A-share market more internationalized after five years of stock connect mechanism
  • (2019-11-19)

The Shanghai-Hong Kong Stock Connect, the first connect program between the Chinese mainland market and Hong Kong, has operated smoothly for the past five years while witnessing China's continuous opening-up of its capital markets, analysts said on Sunday.

Launched on November 17, 2014, the Shanghai-Hong Kong Stock Connect enabled two-way capital flows between mainland investors and international investors in Hong Kong. The Shenzhen-Hong Kong Stock Connect was launched two years later on December 5, 2016.

Since the Shanghai-Hong Kong Stock Connect was launched, it has attracted more capital to the market while bringing the concept of value investment to the mainland's A-share market, said Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co.

"It has grown into a significant pipeline connecting mainland investors and the international ones," Yang told the Global Times Sunday.

"Not only does this groundbreaking platform offer mainland investors many asset diversification options, it also gives international investors unparalleled access to China's equity markets in an efficient, reliable and convenient way," said Hong Kong Exchanges and Clearing (HKEX) Chief Executive Charles Li at the fifth anniversary celebration, according to the website of HKEX.

As of October 31 this year, total cumulative northbound trading turnover on stock connect amounted to 17.41 trillion yuan, bringing net capital inflows of 860 billion yuan into the A-share market. Hong Kong and international investors held a total of 1.22 trillion yuan worth of shares listed on the Shanghai and Shenzhen exchanges by the end of October, compared with 86.5 billion yuan at the end of 2014.

Total cumulative southbound trading turnover was HK$8.75 trillion ($1.12 trillion), bringing net capital inflows of HK$987 billion into the Hong Kong market. Mainland investors held HK$999.5 billion worth of Hong Kong-listed shares through the connect mechanism by the end of October, up from HK$13.1 billion at the end of 2014, statistics from the HKEX showed.

In 2018, the stock connect mechanism facilitated the inclusion of A shares into key global indices including the MSCI, raising international participation in the domestic equity market.

"The Shanghai-Hong Kong Stock Connect has set a good example for other projects, including the Shanghai-London Stock Connect program launched in June," Yang noted, adding that the five-year-old project will continue to provide momentum for the market while being adjusted according to market demand.

Global Times

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