Stock Connect, the ground-breaking cross-border access scheme connecting the Mainland and Hong Kong stock markets, is marking its third anniversary amid growing two-way capital flows.
Shanghai-Hong Kong Stock Connect launched on 17 November 2014 while Shenzhen-Hong Kong Stock Connect launched two years later on 5 December 2016, giving the Mainland and international investors in Hong Kong direct, convenient and efficient access to each other’s market from their home market for the very first time.
Trade volume in both channels has grown steadily since launch as investors become more familiar with the scheme’s operations. In particular, Mainland investors have increasingly used Stock Connect as a channel for their asset allocation.
As of 31 October 2017, Stock Connect Southbound trading turnover totalled HK$3.327 trillion, bringing a net capital inflow of HK$637.5 billion into the Hong Kong market. Mainland investors held nearly HK$808.8 billion worth of shares in Hong Kong through Stock Connect, more than double the amount from the end of 2016. In the first ten months of 2017, Mainland investors trading through Stock Connect contributed 7.2 per cent of the Hong Kong market’s average daily equity turnover, compared with an average of 4 per cent in 2016 and 2.4 per cent in 2015.
The Northbound channel has also been active. Stock Connect Northbound trading turnover totalled RMB4.055 trillion, bringing a net capital inflow of RMB326.3 billion into the Mainland A-share market as of 31 October 2017. Also up to that date, Hong Kong and international investors held RMB310.3 billion worth of shares in Shanghai and RMB181.4 billion worth in Shenzhen.
“Stock Connect is a ground-breaking scheme that brings tremendous benefits to both sides,” HKEX Chief Executive Charles Li said. “Through the scheme’s unique design, which includes order routing in gross along with clearing and settlement in net, the markets on both sides can be connected with the least amount of changes to their respective existing regulatory systems, market structure and market practices. In other words, the programme has been successful in achieving the maximum benefits of a free and open trading market for the Mainland with minimum costs and inconvenience. At the same time, Hong Kong has also secured significant strategic benefits by consolidating its position as an international market.”
“We are extremely pleased to see that operations of Stock Connect have been stable and smooth. It has won the trust of regulators and investors on both sides of the border, and also inspired Bond Connect. Over the last three years it has proven to be transparent, reliable and scalable, while efficiently managing risk supported by closed-loop fund flows. I expect Stock Connect will pave the way for mutual market connectivity across other asset classes in the future,” he said.
“With the upcoming inclusion of A shares into major international indices enabled by Stock Connect, I have no doubt Hong Kong will continue to play a vital role in connecting China with the world,” Mr Li added.
Over the past three years, HKEX has worked with its Mainland and Hong Kong counterparts to improve Stock Connect by introducing Special Segregated Accounts to its clearing system, adding Realtime Delivery versus Payment money settlement in Renminbi, Hong Kong dollars and US dollars for the Northbound related transactions of Stock Connect; and abolishing the aggregate quota. HKEX continues to work with its partners to enhance the programme, such as enabling holiday trading.
The attached Fact Sheet contains more information about fund flows, popular shareholdings and trading records related to Stock Connect since it began in November 2014.