The Stock Exchange of Hong Kong Limited (SEHK) and Hong Kong Securities Clearing Company Limited (HKSCC), wholly-owned subsidiaries of Hong Kong Exchanges and Clearing Limited (HKEX), signed an agreement (the Four-party Agreement) today (Tuesday) with the Shenzhen Stock Exchange (SZSE) and China Securities Depository and Clearing Corporation Limited (ChinaClear) for the establishment of Shenzhen-Hong Kong Stock Connect (Shenzhen Connect).

Shenzhen Connect, another step forward in mutual market access, builds on the successful model of Shanghai-Hong Kong Stock Connect (Shanghai Connect) to allow investors to buy and sell eligible shares listed in the Mainland and Hong Kong markets.

Shenzhen Connect has been developed according to the principles set out in the joint announcement by Hong Kong's Securities and Futures Commission (SFC) and China Securities Regulatory Commission (CSRC) on 16 August 2016 regarding their approval, in principle, of the development of mutual stock market access between Shenzhen and Hong Kong.

The main content of the Four-party Agreement was explained in the circulars issued by SEHK and HKSCC on 16 August 2016, 26 August 2016 and 28 September 2016.  Further details of the agreement are available in the announcement HKEX published today and on the HKEX and HKEXnews websites.

The Four-party Agreement was signed by HKEX Chief Executive Charles Li, SZSE President Wang Jianjun and ChinaClear General Manager Dai Wenhua.  HKEX Chairman C K Chow and SZSE Chairman Wu Lijun witnessed the signing.

"Our agreement with the Shenzhen Stock Exchange and ChinaClear is another important step towards our goal of launching Shenzhen Connect," said HKEX Chairman C K Chow.  "The development of Hong Kong and Shenzhen has been closely linked for almost 40 years.  With the launch of Shenzhen Connect, cooperation between our market and the Mainland market will be raised to a new level.  It will also significantly reinforce the bonds between Hong Kong and Shenzhen."

"Shenzhen Connect is a major policy initiative by the Central Government to promote reform and opening-up in the capital market.  It is a top priority on Shenzhen Stock Exchange's work agenda.  Under the guidance of the regulators on both sides and with the joint efforts of the two stock exchanges and market participants, Shenzhen Connect has been making good progress," said SZSE Chairman Wu Lijun.  "The Four-party Agreement is an important milestone which represents a consensus on the trading and clearing mechanisms between the two exchanges and two clearing houses.  It is also the basis and pre-condition for various other agreements for the implementation of Shenzhen Connect.  The successful signing of the Four-party Agreement underlines the achievements in our preparation for Shenzhen Connect, paving the way for the early launch of the initiative."

"Shenzhen Connect will complete our plan to link the secondary equity markets of the Mainland and Hong Kong so we are looking forward to its launch and welcome today's signing of the Four-party Agreement," said HKEX Chief Executive Charles Li.  "Stock Connect gives us a model for mutual market access beyond equity and we continue to work on breakthroughs in other asset classes to offer the market more flexibility, more products and more opportunities."

"The stock eligibility criteria of Shenzhen Connect highlight the multi-tiered, multi-product characteristics of Shenzhen Stock Exchange. The eligible stocks include constituents of the SZSE Component Index and SZSE Small/Mid Cap Innovation Index, as well as SZSE-listed A shares of A+H companies.  They share the features of wide market capitalisation coverage and high market representativeness.  The valuation and market value of these eligible stocks are quite similar to those of Shanghai Connect.  The companies have sound business performance and good growth potential.  The sectoral distribution of eligible stocks also reflects Shenzhen Stock Exchange's position as a marketplace for emerging industries," said SZSE President Wang Jianjun.

"The signing of the Four-party Agreement is a new starting point to further and deepen our cooperation.  As an important Financial Market Infrastructure supporting the Stock Connect programme of the Mainland and Hong Kong markets, ChinaClear will continue to optimise its risk management and emergency mechanism to provide safe, convenient and efficient depository and clearing services, and will support the smooth implementation and operation of Shenzhen Connect," said ChinaClear General Manager Dai Wenhua.

HKEX expects the Hong Kong market should be ready for the implementation of Shenzhen Connect in the second half of November.  However, the commencement of the programme is subject to market readiness and approval by the CSRC and SFC.

HKEX Chief Executive Charles Li (seated, right), SZSE President Wang Jianjun (seated, centre) and ChinaClear General Manager Dai Wenhua (seated, left) signed the Four-party Agreement for Shenzhen-Hong Kong Stock Connect in Shenzhen today. HKEX Chairman C K Chow (standing, right) and SZSE Chairman Wu Lijun (standing, left) also attended and witnessed the signing.

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