In total, over three years, the northbound trading of China A-shares in Shanghai and Shenzhen by foreign investors accounts for RMB4.06trn ($611bn) while the southbound trading of Hong Kong equities by mainland traders has amounted to HK$3.33trn ($426bn).
The programme that links the Shanghai and Hong Kong stock exchanges marks its third anniversary on Friday. The cross-border Stock Connect was launched on 17 November 2014 and has operated for 674 trading days.
The northbound channel allows international investors to participate in China’s domestic A-shares market. Since the launch it has brought a net capital inflow of RMB326.3bn into the A-share market, according to the Hong Kong Stock Exchange.
At the end of October 2017, eligible investors held RMB310.3bn worth of shares in Shanghai and RMB181.4bn worth in Shenzhen.
According to the data on the HKEX website, the top five company holdings by northbound investors span a range of sectors: consumer, financials, healthcare, energy and agriculture. Chinese liquor maker Kweichow Moutai and the insurer Ping An are the top holdings.
HKEX data also shows that 30% of shares in Shanghai International Airport is held by international investors through the Stock Connect.
Top five northbound holdings
|
Shares |
Value (in RMB) |
| Kweichow Moutai |
$51.93bn |
|
Ping An Insurance |
$35.50bn |
| Jiangsu Hengrui Medicine |
$22.60bn |
|
China Yangtze Power |
$17.46bn |
| Inner Mongolia Yili Industrial Group |
$16.29bn |
Source: HKEX
Southbound trading
There are 308 Hong Kong-listed companies available to mainland investors via the southbound stock connect scheme, according to the Shanghai Stock Exchange’s website. As of the end of October 2017, the scheme has attracted a net capital inflow of HK$637.5bn into the Hong Kong market.
During the first year after the launch, the average transaction volume through Stock Connect was merely 0.73% of the daily turnover at the exchange. After the launch of Shenzhen-Hong Kong Stock Connect in late 2016, mainland investors contributed 7.2% of average daily equity turnover in the first ten months of 2017.
Banking shares are the most popular among mainland investors. Seven out of the top ten holdings through the scheme are banking and finance firms. HSBC tops the chart with mainlanders holding $9.7bn worth of stock, data from HKEX shows.
Top ten southbound holdings
|
Shares |
Value (in HKD) |
|
HSBC |
75.79bn |
| CCB |
66.46bn |
|
ICBC |
58.38bn |
| Tencent |
51.18bn |
|
Sunac China |
39.58bn |
| Geely Automobile |
19.08bn |
|
China Merchants Bank |
15.53bn |
|
New China Life Insurance |
14.94bn |
|
Bank of China |
14.64bn |
| Fullshare Holdings |
13.70bn |
Source: HKEX
The Stock Connect is one of several ways foreign investors can access China’s onshore market. The earlier Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) programmes allow access to the mainland securities markets based on quota granted to foreign firms.
Three years old, the Stock Connect has been gaining interest. Earlier this month, Blackrock launched and AI-driven China fund that uses the Stock Connect as its main trading conduit for Chinese equities.
Regulators in Singapore recently announced they would explore a Stock Connect scheme with China, FSA reported earlier.
