(Yicai Global) Dec. 20 -- The Chinese authorities are widening the scope of stocks eligible for trading through the Hong Kong stock connect program with mainland bourses to include overseas firms with a primary listing in Hong Kong in the latest move to promote the development of the nation’s capital markets.

The Shenzhen and Shanghai bourses will include the stocks of foreign companies that have their main listing in Hong Kong, are constituents of the Hang Seng Composite Index and which meet certain criteria, the China Securities Regulatory Commission and Hong Kong’s Securities and Futures Commission said yesterday.

“The inclusion of Hong Kong stocks issued by eligible international companies in the stock connect will significantly enhance the attractiveness of Hong Kong as a world-leading listing venue,” said Nicolas Aguzin, chief executive of Hong Kong Exchange and Clearing.

“International issuers will not only get the full benefits of a listing in Hong Kong, but will also gain access to an enhanced and significant regional investor base,” he added.

According to the CSRC’s announcement, northbound trading will include stocks with a market capitalization of CNY5 billion (USD718 million) or more that are also components of the Shanghai A Share Index and the Shenzhen Composite Index and meet certain liquidity criteria.

Southbound trading will include stocks with a HKD5 billion (USD643 million) or higher market cap and are part of the Hang Seng Composite Small Cap Index.

For regular companies listed on both the mainland and Hong Kong markets, the arrangement will remain unchanged, the regulators added. The two bourses will revise their rules and update their systems over the next three months, they added.

It is not the first time that the Shenzhen and Shanghai-Hong Kong stock connects have been extended. In November 2020, they were broadened to include stocks on Shanghai’s new Nasdaq-style Star Market. While the Hong Kong Stock Exchange has brought into the program firms with weighted voting rights, not-yet-profitable biotech companies, and exchange traded funds. 

The stock connects allow mainland and Hong Kong investors to trade stocks in each other’s markets through their home exchange. The Shanghai-Hong Kong link was launched in November 2014 and the Shenzhen-Hong Kong leg in December 2016.

Editor: Kim Taylor