SHANGHAI: China aims to link trading between the Shenzhen stock exchange and the Hong Kong market this year, the central bank chief said, following a similar connection with the Shanghai bourse.
China launched a landmark “stock connect” between Shanghai and its special administrative region of Hong Kong in late 2014, opening up its closeted share market to the outside world and giving foreign investors access to Chinese companies not quoted elsewhere.
Trading through the Shanghai-Hong Kong link was initially lacklustre, although it later picked up during a huge rally in Chinese stocks before a bubble burst.
“The Shenzhen-Hong Kong connect will be launched this year, which shows China’s capital market opening a new route to link with the world,” Zhou Xiaochuan, head of the People’s Bank of China, said in an article posted on the PBoC website on Tuesday.
The southern boom town of Shenzhen borders Hong Kong, and as China’s second exchange, its bourse mainly trades small companies and technology stocks.
Investors cheered the news on Wednesday. By midday, the Shenzhen index surged 3.34% and the Shanghai index jumped 2.58%.
“This is giving a big psychological boost to the Chinese stock markets,“ Ronald Wan, Hong Kong-based chief executive officer at Partners Capital International, told Bloomberg News. “But optimism may wane soon, given what has happened to the Hong Kong-Shanghai connect.”
The PBoC later updated the posting, clarifying that the article was based on an internal speech that Zhou delivered in May.
The Shanghai-Hong Kong Stock Connect, which allows the equivalent of US$3.8 billion a day in cross-border transactions, enables international investors to trade selected stocks on Shanghai’s tightly restricted exchange and lets mainland investors buy shares in Hong Kong.
Chinese Premier Li Keqiang said in March that the country will launch a connect programme between Shenzhen and Hong Kong “at an appropriate time” in a push for financial reforms, but he gave no timetable.
The launch of the scheme was widely expected to be delayed after the plunges in Chinese stocks shook global markets. The benchmark Shanghai index is now down more than 30% from its June peak. - Reuters
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