HONG KONG • A long-awaited stock trading link between the Hong Kong and Shenzhen exchanges will go live on Dec 5, regulators said yesterday, further opening up China's capital markets to global investors and giving them access to some of its fastest-growing companies.
The launch will extend an existing trading link between Hong Kong and Shanghai, allowing foreign investors to trade Shenzhen stocks, one of the world's busiest and most tech-focused exchanges, from Hong Kong. Domestic Chinese investors, meanwhile, will be able to trade an expanded range of Hong Kong stocks via the Shenzhen and Shanghai exchanges.
"The necessary trading and clearing rules and other relevant rules, the daily quota mechanism, and other regulatory and operational arrangements have been finalised," the China Securities Regulatory Commission and the Hong Kong Securities and Futures Commission said in a statement. "The stock exchanges and the clearing houses have completed a series of market rehearsals with participants in both markets and reported that systems are ready. Trading will commence on Dec 5, 2016."
The regulators said they had also signed a memorandum of understanding on regulatory and enforcement cooperation for the cross-border trading link.
The Shenzhen Connect scheme had been expected to go live more than a year ago, but was put on hold by last year's market crash, which saw stocks slump around 40 per cent and a raft of interventionist measures unleashed to prop up markets. China announced the launch of the scheme in August.
With more than 1,800 listed companies that have a combined market capitalisation of US$3.3 trillion (S$4.7 trillion), the Shenzhen market is viewed by analysts and fund managers as a major long-term investment opportunity, although sky-high valuations and wild swings in Chinese stocks could keep some investors wary initially.
The rule changes are expected to lead to dramatic inflows into Hong Kong as domestic investors seek ways to diversify their assets out of a weakening yuan.
"We believe this new link could be a re-rating catalyst for small-cap stocks in Hong Kong," portfolio managers at Matthews Asia wrote in a note yesterday.