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China and Hong Kong to expand Stock Connect

The adjustments will implement in about three months.
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Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission jointly announced that they have approved the further expansion of stocks eligible under the mainland-Hong Kong Stock Connect programme.

After the expansion, offshore investors are able to buy constituent stocks of the Shanghai Stock Exchange (SSE) A-Share Index and the Shenzhen Stock Exchange (SZSE) Composite Index that have a market capitalisation of Rmb5bn ($715.4m) or above and meet certain liquidity criteria.

Overseas investors can also buy SSE and SZSE-listed stocks that have issued both A-shares and H-shares.

Meanwhile, mainland investors will be eligible to purchase stocks of foreign companies whose primary listing is in Hong Kong and that are constituents of the Hang Seng Composite Index and meet relevant market-cap criteria after the expansion.

The scope of the stocks eligible for southbound trading under Shanghai-Hong Kong Stock Connect will also be aligned with those available under Shenzhen-Hong Kong Stock Connect.

“The further expansion of the scope of Stock Connect will give international investors more choice in A-shares and consolidate Hong Kong’s position as a gateway to mainland China,” said Julia Leung, the SFC’s acting chief executive officer.

“In particular, the inclusion of foreign companies primary listed in Hong Kong is of strategic importance to Hong Kong as a leading fundraising platform for international companies.”

The commission believes the move will strengthen mutual access between the mainland and Hong Kong stock markets and provide additional liquidity for both markets.

The Connect scheme is expected to include stocks that account for more than 80% of the equity trading in Hong Kong and the two mainland exchanges in Shanghai and Shenzhen after the adjustment.

The Hong Kong stock exchange (HKEX) also welcomed the move.

“The inclusion of eligible Hong Kong stocks issued by international companies in Stock Connect will significantly enhance the attractiveness of Hong Kong as a world-leading listing venue,” said HKEX chief executive officer Nicolas Aguzin.

“International issuers will not only get the full benefits of a listing in Hong Kong, but will also gain access to an enhanced and significant regional investor base.”

Part of the Mark Allen Group.