China kick-starts the Shenzhen-Hong Kong stock connect

Market - Akanksha Singh - Dec 05,2016

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shenzhen hongkong stock connect makes its much awaited debut

Shenzhen-Hong Kong stock connect, the delayed cross border trading scheme between China and Hong Kong was launched this Monday making a decent debut.

Looked upon as China’s effort to expand its $6.5 trillion equity market and bring in international investments, the Shenzhen-Hong Kong stock market connect made it’s much awaited debut this Monday.

The link which is a second one between mainland China and Hong-Kong bourses, following the launch of Shanghai-Hong Kong connect, was supposed to be launched by the end of last year but was delayed because of the Chinese market’s volatility.

Though the Shenzhen-Hong Kong Stock Connect saw lower trade volumes than its older (two-year) counterpart Shanghai-Hong Kong Stock Connect during its historic debut, yet market analysts hailed the levels as a “good start”. The trading connect scheme, linking China’s southern most stock exchange to Hong Kong’s bourse, kick-started with a grand ceremony attended by numerous government officials and top executives from the exchange.

“The new cross border trading connect in Hong Kong will further strengthen Hong Kong’s role as the ‘super-connector’ between mainland (Chinese) markets and the world,” Chief Executive of Hong Kong CY Leung said.

The stock connect will allow international investors to trade shares in over 900 Shenzhen firms, and 315 Hong Kong stocks. Hong Kong has benefited from the previous Stock Connect scheme as mainland (China’s) investors look forward to buy overseas assets in counter to the weakening Chinese Yuan currency.

The Shenzhen link embarked on its trade journey with HSBC and Konka Group claiming the title of ‘first shares exchanged over the cross-border trading platform’. By 11am, Monday, the stock connect took off with 1.35 billion Yuan worth of northbound trading, though only HK$442 million of southbound trades were recorded on the stock market. However, these levels were much lower than the volumes of trade the Shanghai-Hong Kong Stock Connect saw, which was over 3.04 billion Yuan worth of northbound trade and HK$1.37 billion worth of southbound trade.