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Hong Kong Celebrates Launch Of Shanghai Stock Trading Link

by Mary Swire, Lowtax.net, Hong Kong
20 November, 2014

Hong Kong Exchanges and Clearing Limited (HKEx) hosted a ceremony on November 17 to celebrate the successful launch of the Shanghai-Hong Kong Stock Connect (SHKSC).

The SHKSC pilot is a mutual market access program that allows Mainland investors to trade stocks listed on the Stock Exchange of Hong Kong (SEHK) directly through the Shanghai Stock Exchange (SSE). At the same time, it also allows Hong Kong and overseas investors to trade stocks listed on the SSE directly through the SEHK, also for the first time.

Leung noted that the scheme highlights Hong Kong's unique role in facilitating China's economic development. "We offer the unique feature of being part of China and yet outside the Mainland. SHKSC aligns the Mainland market with international markets. and is the upgraded version of Hong Kong as the 'super-connector' to and from China," he said.

"This is the first time that investors in Shanghai and Hong Kong markets, whether individuals or institutions, are able to trade listed shares in the other market, through their own local brokers and exchange," HKEx Chairman C K Chow added. "It is a breakthrough in the opening up of China's financial markets and a great milestone in the development of Hong Kong as a unique gateway between mainland and international investors."

HKEx Chief Executive Charles Li also spoke at the ceremony about the historic nature of the program: "This is a long-term scheme, and its success will be measured in years, not days or weeks. The immediate achievement is the infrastructure itself, which connects such vastly different and disparate markets and systems. The regulators, exchanges, and clearing houses on both sides of the boundary have worked extremely hard over the last seven months to make today a reality."

As had been expected, on the first day of trading, north-bound trading (from Hong Kong to Shanghai) exceeded south-bound trading (from Shanghai to Hong Kong), as international investors took the advantage of the new way of purchasing Mainland Chinese shares. Sentiment was also said to have been helped by the recent confirmation that their trading in Mainland shares had obtained a Chinese capital gains tax exemption.

In fact, Hong Kong used up all of its daily net quota with total stock trading reaching over RMB12bn (USD2bn), while trading over the program in Shanghai took up only 12.8 percent of its quota at RMB2.3bn.

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