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China Aiming to Launch Shenzhen-Hong Kong Stock-Connect Program Mid-December
Stock-trading link will allow investors access to China’s tech-heavy exchange
By SHEN HONG
Aug. 25, 2016 4:32 a.m. ET
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SHANGHAI—China is aiming to launch a much anticipated stock-trading link between Shenzhen and Hong Kong around mid December, two people briefed by regulators told The Wall Street Journal on Thursday, in a move that will allow global investors access to the country’s tech-heavy exchange.
The latest development follows a long-awaited approval last week by the State Council, China’s cabinet, to launch the scheme. The State Council said that relevant preparation work for the Shenzhen-Hong Kong Stock Connect program has been completed, but gave no other details.
In order to facilitate the rollout of the stock-link program, China’s securities clearing agency has decided to postpone a system upgrade until the launch is complete, the two people, who declined to be named, said.
The clearing agency had originally planned to upgrade its system in early October, they added. “This will be Beijing’s Christmas gift for global investors,” said one of the people.
Chinese authorities had toyed with the idea of launching the program as early as the second half of last year, only to abandon it after the brutal stock-market crash in the summer.
Anticipation for the Shenzhen stock-link program has been building since the launch of the Shanghai-Hong Kong Stock Connect in November 2014.
That program allows foreign investors to tap into China’s largest blue-chip companies listed on the Shanghai exchange, by far the bigger of China’s two bourses. It also gives Chinese investors unprecedented access to the Hong Kong market.
The smaller, 3.2 trillion dollars, Shenzhen market is the world’s seventh largest. It is likely to prove attractive to foreign investors because it is where fast-growing Chinese companies that operate in sectors such as technology, pharmaceuticals and clean energy often list.
By contrast, Shanghai, is dominated by less-vibrant state-owned banks and oil companies.
The Shenzhen link will put some 880 stocks, representing more than 1 trillion dollars in market capitalization, on the menu of global investors. The ChiNext, a listing board focused on fast-growing startups, will also be opened up, though it will be limited to professional institutional investors.
Regulators also said that under the new stock link scheme, there would no longer be an upper limit on the total amount of Chinese shares foreigners can hold. Currently, global investors can buy up to 300 billion yuan worth of shares in more than 500 Shanghai companies.
The Shenzhen market opened in 1990, when the city was spearheading some of the country’s most far-reaching economic overhauls.
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