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To promote the development of capital markets in both the Mainland and Hong Kong, the China Securities Regulatory Commission (CSRC) and the Securities and Futures Commission (SFC) have approved, in principle, the establishment of mutual stock market access between Shenzhen and Hong Kong (Shenzhen-Hong Kong Stock Connect). Shenzhen-Hong Kong Stock Connect will be established by the Shenzhen Stock Exchange (SZSE), The Stock Exchange of Hong Kong Limited (SEHK), China Securities Depository and Clearing Corporation Limited (ChinaClear) and Hong Kong Securities Clearing Company Limited (HKSCC).
1. Shanghai-Hong Kong Stock Connect has been operating smoothly since its official launch on 17 November 2014, providing the foundation and the conditions for the launch of Shenzhen-Hong Kong Stock Connect.
2. After the launch of Shenzhen-Hong Kong Stock Connect, mutual stock market access between the Mainland and Hong Kong will comprise the Northbound Shanghai Trading Link, the Southbound Hong Kong Trading Link under Shanghai-Hong Kong Stock Connect, the Northbound Shenzhen Trading Link and the Southbound Hong Kong Trading Link under Shenzhen-Hong Kong Stock Connect.
The Northbound Shanghai Trading Link refers to investors, through their appointed Hong Kong brokers and a securities trading service company established by SEHK in Shanghai, trading eligible shares under Shanghai-Hong Kong Stock Connect listed on the Shanghai Stock Exchange (SSE) by routing orders to SSE.
The Southbound Hong Kong Trading Link under Shanghai-Hong Kong Stock Connect refers to investors, through their appointed Mainland securities firms and a securities trading service company established by SSE in Hong Kong, trading eligible shares under Shanghai-Hong Kong Stock Connect listed on SEHK by routing orders to SEHK.
The Northbound Shenzhen Trading Link refers to investors, through their appointed Hong Kong brokers and a securities trading service company to be established by SEHK in Shenzhen, trading eligible shares under Shenzhen-Hong Kong Stock Connect listed on SZSE by routing orders to SZSE.
The Southbound Hong Kong Trading Link under Shenzhen-Hong Kong Stock Connect refers to investors, through their appointed Mainland securities firms and a securities trading service company established by SZSE in Hong Kong, trading eligible shares under Shenzhen-Hong Kong Stock Connect listed on SEHK by routing orders to SEHK.
3. The principal arrangements for Shenzhen-Hong Kong Stock Connect are made with reference to those under Shanghai-Hong Kong Stock Connect and by following the existing laws and regulations and operational models governing trading and clearing in each market. Other arrangements are set out below:
a) Eligible shares
In respect of the Northbound Shenzhen Trading Link, eligible shares refer to any constituent stock of the SZSE Component Index and SZSE Small/Mid Cap Innovation Index which has a market capitalisation of RMB6 billion or above and all SZSE-listed shares of companies which have issued both A shares and H shares. At the initial stage of the Northbound Shenzhen Trading Link, investors eligible to trade shares that are listed on the ChiNext Board of SZSE under the Northbound Shenzhen Trading Link will be limited to institutional professional investors as defined in the relevant Hong Kong rules and regulations. Subject to the resolution of related regulatory issues, other investors may subsequently be allowed to trade such shares.
In respect of the Southbound Hong Kong Trading Link under Shenzhen-Hong Kong Stock Connect, the scope of eligible shares will be the constituent stocks of the Hang Seng Composite LargeCap Index and Hang Seng Composite MidCap Index, any constituent stock of the Hang Seng Composite SmallCap Index which has a market capitalisation of HK$5 billion or above, and all SEHK-listed shares of companies which have issued both A shares and H shares.
As to the detailed formulas and methods for calculating the above-mentioned market capitalisations, SZSE and SEHK will make separate announcements in due course.
In respect of the Northbound Shanghai Trading Link and the Southbound Hong Kong Trading Link under Shanghai-Hong Kong Stock Connect, the scope of eligible shares will remain unchanged for the time being.
The scope of eligible shares may be adjusted in light of the market environment and actual operational performance, giving due consideration to the principles of convenience and prudence.
b) Investment quota
There will be no aggregate quota under Shenzhen-Hong Kong Stock Connect. The Shenzhen-Hong Kong Stock Connect daily quota will be the same as that currently under Shanghai-Hong Kong Stock Connect, that is, a daily quota of RMB13 billion is set for the Northbound Shenzhen Trading Link and a daily quota of RMB10.5 billion is set for the Southbound Hong Kong Trading Link under Shenzhen-Hong Kong Stock Connect. The investment quota may be adjusted by the parties in light of actual operational performance.
The aggregate quota under Shanghai-Hong Kong Stock Connect will be abolished with immediate effect on the date of this announcement.
4. To facilitate and meet the need of Mainland and Hong Kong investors to manage price risks in one another’s stock markets, the CSRC and the SFC have agreed, in principle, to jointly study and introduce other financial products.
5. To further enrich the variety of traded products and provide more investment opportunities and convenience for domestic and overseas investors, the CSRC and the SFC have reached a consensus to include exchange-traded funds (ETFs) as eligible securities under the mutual market access scheme. A launch date will be announced separately after Shenzhen-Hong Kong Stock Connect has been in operation for a period of time and upon the satisfaction of relevant conditions.
6. Other issues concerning Shenzhen-Hong Kong Stock Connect which are not described in this joint announcement shall be dealt with by reference to the joint announcement on Shanghai-Hong Kong Stock Connect dated 10 April 2014. Such issues include applicable trading, clearing and listing rules, clearing arrangements, investor eligibility, and cross-boundary regulatory and enforcement cooperation and liaison mechanisms.
Stock exchanges and securities registration and clearing organisations in both the Mainland and Hong Kong will formulate and issue or adjust related business rules, actively carry out all preparation work such as the development and testing of technical systems, applications for operational qualifications, and investor education, and will make announcements regarding their progress. The formal launch of Shenzhen-Hong Kong Stock Connect will only take place after preparation for the relevant trading and clearing rules and systems has been finalised, all regulatory approvals have been granted, market participants have sufficiently adapted their operational and technical systems, and all necessary arrangements for cross-boundary regulatory and enforcement cooperation, as well as investor education, have been in place. It should take approximately four months from the date of this joint announcement to complete the above-mentioned preparations. A separate announcement will be made with respect to the formal launch date.
