Shanghai-Hong Kong Stock Connect Program Marks Third Anniversary of Interconnectivity
Xu Wei
/SOURCE : Yicai
Shanghai-Hong Kong Stock Connect Program Marks Third Anniversary of Interconnectivity

(Yicai Global) Nov. 15 -- The Shanghai-Hong Kong Stock Connect program and the Shenzhen-Hong Kong Stock Connect program have witnessed a steady growth of transactions thanks to better understanding on the part of investors of the two sides of the interconnectivity mechanism. More and more investors from the Chinese mainland began to purchase overseas assets through the Hong Kong Stock Connect programs, show the main transaction data of the Hong Kong stock connectivity programs over the past three years as issued by the Hong Kong Exchanges and Clearing Limited (HKEx) yesterday.

As of Oct. 31 this year, transactions worth HKD3.33 trillion (USD426.4 billion) had been made through the Hong Kong Stock Connect programs, creating HKD637.5 billion of net capital inflows for the Hong Kong Stock Market. Investors from the Chinese mainland have bought USD103.7 billion worth of Hong Kong shares through the programs, up more than 100 percent compared with that of last year. In the first 10 months this year, the average daily transaction volume of the programs accounted for 7.2 percent of that in the Hong Kong Stock Market, much higher than 2.4 percent in 2015 and 4 percent in 2016, the data showed.

More transactions are also made on the part of the Shanghai Stock Connect program and the Shenzhen Stock Connect program. Up until Oct. 31 this year, they had facilitated transactions worth USD614.4 billion, generating CNY326.3 billion (USD49.2 billion) of net capital inflows for the two main stock markets in the Chinese mainland. During this period, investors from Hong Kong and overseas have together held CNY3.31 trillion of Shanghai-traded shares and CNY181.4 billion of Shenzhen-traded shares.

The connect programs link the markets in both sides ever closer. By virtue of the innovative approach of pooling all transactions and net clearing amount, both markets can carry out interconnected transactions while keeping in place their respective market regulations, market structure and transaction practices. Such programs help open the Chinese mainland capital market to its full potential at the lowest institutional cost and make Hong Kong more attractive as an international finance center, said Li Xiaojia, executive director of HKEx.

The Shanghai-Hong Hong Stock Connect program kicked off in November 2014, while the Shenzhen-Hong Kong Stock Connect program took off the ground in December 2016. Both schemes make it convenient for investors to directly engage in each other's market for the first time without having to change local market transaction practices.

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Keywords: Hong Kong , Shanghai-Hong Kong Stock Connect Program , Shenzhen-Hong Kong Stock Connect Program