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The World Comes To China

Global investors are finding their destination in China, as A-shares make their way into widely tracked benchmark indices. Here's the journey of foreign capital into China:

2019
JUL
AUG
OCT
MAR
*All amounts are estimations only.
A-share free-float market cap held by institutional investors
SPSA Accounts?
Northbound contribution to China Stock market trade value
How much do you know about accessing China?
Answer 5 questions or
see a comparison of China access channels
START
Q1 of 5
Which China access channel offers the Special Segregated Account (SPSA)?
Stock Connect
(R) QFII

SPSA is an optional arrangement under Stock Connect offered to investors to enhance pre-trade checking.

Under the SPSA arrangement, an investor can request a custodian to open a SPSA in CCASS to maintain its holdings in China Connect Securities. CCASS will take a snapshot of the securities holdings under each SPSA every day and replicate such holdings to China Stock Connect System to perform pre-trade checking. Thus the investor can avoid the needs to pre-deliver the securities from their custodians to executing brokers prior to a sell trade.

Learn more about the SPSA account here.

Which of the following requires prefunding?
Stock Connect
(R) QFII

(R)QFII custodian must confirm availability of cash before trading occurs.

Prefunding is not required under Stock Connect.

Day trade is allowed for which of the following A-share investment tool?
Stock Connect
Hong Kong-listed A-share ETFs

Day trading of Hong Kong-listed A-share ETFs is allowed, similar to other stocks listed on the HKEX.

Same-day turnaround of stock is prohibited in the A-share market. Such rules apply to Northbound trades under Stock Connect.

Which of the following is subject to investor-level investment quota ?
Stock Connect
(R) QFII

(R)QFII license holders must obtain approval for an investment quota from the State Administration of Foreign Exchange (SAFE) before trading occurs.

In Stock Connect, only market-level daily quota is implemented. The Northbound daily quota is set at RMB 52 billion for each of Shanghai Connect and Shenzhen Connect, and the Southbound Daily Quota is set at RMB 42 billion for each of Shanghai Connect and Shenzhen Connect.

Daily quota balance of the Stock Connect can be found here.

Which of the following instrument permits covered short exposure?
Stock Connect
(R) QFII

In Stock Connect, covered short selling of Connect Securities is allowed subject to certain requirements.

Short selling is not allowed in (R)QFII.

QFII/RQFII
Stock Connect
A-Share ETFs (SEHK*)
A-Share Futures^ (HKFE**)
Currency CNY Price quoted in CNY, settlement in CNH (offshore RMB) CNH, HKD, and/or USD denomination Coming Soon
Legal Agreement Mainland China rules; offshore rules applicable for RQFII Offshore rules (Hong Kong) Offshore rules (Hong Kong) Coming Soon
On-shore Audit Yes No No Coming Soon
Quota Investor-level and market-level quotas None at investor level, only daily quota at market level None Coming Soon
Pre-Funding Requirement Yes No No Coming Soon
Omnibus Account Allowed No Yes Yes, depends on broker arrangement Coming Soon
Short Selling No Limited Yes, depends on broker and custodian arrangement Coming Soon
Custody Onshore Offshore (Hong Kong) Offshore (Hong Kong) Coming Soon
Settlement by T+2 No Settlement on T day, depending on broker and custodian arrangement T+2 settlement Coming Soon
real-time DVP Settlement No Yes, depends on broker and custodian arrangement Yes Coming Soon
Asset and Cash Repatriation/ Redemption Cross-border in China Offshore (Hong Kong) Offshore (Hong Kong) Coming Soon
Market Entry (Filings) (R) QFII licence & quota application Hong Kong broker/custody accounts opening (China Connect Exchange Participant) Offshore broker account opening with SEHK* Participant Coming Soon
Market Entry (Time) 3-6 Months 2-4 Weeks Immediate Coming Soon

*SEHK: The Stock Exchange of Hong Kong
**HKFE: Hong Kong Futures Exchange
^Refers to MSCI China A Index Futures. Product launch subject to regulatory approval and market conditions.

HKEX: Your China A solution

Stock Connect
A-share ETFs
A-share Futures
RMB FX Derivatives
OTC Clear

Stock Connect

A unique collaboration between the Hong Kong, Shanghai and Shenzhen Stock Exchanges, Stock Connect is the gateway that enables international investors to invest in China A-shares.

Stock Connect features:
  • Easy to set up with Hong Kong service providers
  • No prefunding required on transaction settlement
  • Enjoy real-time delivery vs payment
  • Universe of Shanghai and Shenzhen Stock Exchange eligible A-share securities
  • Offshore (Hong Kong) documentation / follow home-market rules

Connect to China here.

A-share ETFs

HKEX offers a comprehensive suite of ETFs for investors to capture China opportunities at a low cost. Supported by Hong Kong's tax treaty network and domestic tax rules, Hong Kong-listed ETFs are one of the most tax-efficient channels for Asian Investors to invest in the China market.

A-share Futures

HKEX signed a licence agreement with MSCI to introduce futures contracts on the MSCI China A Index. Upon completion of MSCI's inclusion process in November 2019, the index will comprise 421 large- and mid-cap A-shares, offering comprehensive sector coverage reflective of China's growth engines. Launch of the contract is subject to regulatory approval and market conditions.

Learn more about the future of China here.

RMB FX Derivatives

HKEX offers a comprehensive range of RMB derivatives for investors to manage currency exposure of their China investments. These include the world's first deliverable RMB currency futures and options offering margin offset between the products and margins acceptable in multiple currencies, and cash-settled RMB futures contracts available in major currency pairs.

An expanding offshore RMB market, coupled with amplifying RMB volatility, is driving record turnover in our USD/CNH futures contract.

USD/CNH Futures
USD/CNH Options

OTC Clear

OTC Clear is a globally recognized Qualified Central Counterparty (QCCP). Our clearing network includes banks from Europe, the US and Asia as well as major banks in Hong Kong, and we are the only QCCP accepting Hong Kong subsidiaries or branches of Chinese banks as direct clearing members. Clearing of derivatives with a QCCP enables clearing members to significantly reduce capital required against risk-weighted assets (RWA), which ultimately leads to your optimised capital efficiency. Operating in Hong Kong which is an offshore RMB centre, OTC Clear provides clearing services for CNH Cross Currency Swaps (CCS). Meanwhile, such services are not offered by any clearing house in Europe and the US.

OTC Clear currently provides clearing of:
  • Interest rate swaps (IRS)
  • Non-deliverable currency forwards (NDF)
  • Cross currency swaps (CCS)
  • Deliverable FX (DFX)

Covered short selling of Connect Securities is allowed subject to the following requirements (not exhaustive):

  • Only eligible Connect Securities (Short Selling Security) can be short sold. The List of Eligible SSE Securities for Short Selling can be found here, while the List of Eligible SZSE Securities for Short Selling can be found here;
  • China Connect Exchange Participants (CCEPs) can input short selling orders during the opening call auction session, continuous auction sessions for both SSE and SZSE, as well as closing call auction for SZSE on each Stock Connect System trading day;
  • CCEPs are required to flag the short selling orders when inputting them into the system;
  • Short selling orders must be submitted in multiples of 100 shares;
  • Short selling orders are subject to price restrictions.

For details please refer to question 1.21. in the FAQ here.