Stock Markets To International Community Agrees To Be Opened By Chinese Regulator

The China Securities Regulatory Commission and Hong Kong's Securities and Futures Commission (SFC) have declared that the scope of underlying equities eligible for trading under Chinese mainland Hong Kong Stock Connect methods would be expanded (in theory).

With the worldwide growth of HKEX, which has just established an office in New York, the pragmatic collaboration between Chinese mainland and Hong Kong capital markets and the extension of the program will receive more prominence in foreign markets.

The New York office will offer a dedicated staff on the ground for HKEX's North American clients and will promote the exchange operator's liquid main and secondary cash markets, as well as its unique link with Mainland China's markets and comprehensive suite of derivatives.

Eligibility of underlying stocks

For the constituent stocks eligible for northbound trading under the Shenzhen Connect, the constituent stocks of the SZSE Composite Index with a market capitalization of CNY 5 billion or above and meeting certain liquidity criteria will be chosen to replace the constituent stocks of the Shenzhen Component Index and the SZSE Small/Mid Cap Innovation Index with a market capitalization of CNY 6 billion or above under the Shenzhen Connect, while the A shares that have issuable will be chosen.

On the basis of the present scope, the underlying equities eligible for southbound trading under the Hong Kong Connect will be enlarged to include stocks of international businesses predominantly listed in Hong Kong that are components of the Hang Seng Composite Indices and fulfill appropriate requirements.

With additional SZSE-listed equities included in the Shenzhen Connect after the expansion, it will give investors outside the Chinese mainland more options for growth and innovation-oriented assets for allocation, as well as attract medium and long-term capital from outside the Chinese mainland. The addition of overseas corporations to the list of underlying equities eligible for southbound trading under the Hong Kong Connect would help Hong Kong improve its attractiveness to multinational firms.

According to the Chinese regulator, broadening the scope of underlying stocks eligible for trading through Chinese mainland Hong Kong Stock Connect mechanisms is an important measure of the CSRC to faithfully implement the guiding principles of the 20th CPC National Congress, actively serve the creation of a new development pattern, and promote high-standard, two-way capital market opening.

“It is of positive importance to enabling cross-border investment activities of investors in and outside the Chinese mainland and encouraging the coordinated growth of Chinese mainland and Hong Kong markets. Following that, SZSE will stick to the unified strategy of CSRC and the basic concept of achieving growth while preserving stable development. We will collaborate with relevant parties such as HKEX, CSDC, and HKSCC to make adequate business and technological preparations, release specific arrangements for the expansion of the scope of stocks to the market as soon as possible, including the selection criteria of eligible stocks, adjustment mechanism, and implementation time, and put forth the effort to ensure the smooth implementation of the expansion.”

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