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Shenzhen-HK Stock Connect To Launch This Year

by Mary Swire, Lowtax.net, Hong Kong
17 March, 2016

On March 16, Chinese Premier Li Keqiang confirmed that authorities in China and Hong Kong are intensively discussing proposals to link the stock exchanges in Shenzhen and Hong Kong this year.

The new stock link is expected to be launched along the same lines as the Shanghai-Hong Kong Stock Connect (SHKSC) program, which was launched in November 2014. The SHKSC is a mutual market access program that allows Mainland investors to trade stocks listed on the Hong Kong Stock Exchange (SEHK) directly through the Shanghai Stock Exchange (SSE), and for Hong Kong and overseas investors to trade stocks listed on the SSE directly through the SEHK.

Li confirmed that a great deal of experience has been gleaned from the operation of the SHKSC, and that it "has brought real benefits to both cities."

The Shenzhen-Hong Kong Stock Connect was expected to launch last year. Its launch may have been delayed by Chinese stock market price falls.

Situated in the Pearl River Delta region in Guangdong province and close to Hong Kong, Shenzhen's stock exchange focuses on stocks in SMEs, high-technology companies, and startup companies, and the city has been seen as the next logical place from which to build greater links between stock exchanges on the Mainland and Hong Kong.

Last year's signing of the fourth Protocol to the China-Hong Kong double taxation agreement should also aid trading activity through the new stock link. The Protocol clarifies the conditions under which an investment fund would qualify for Hong Kong resident status, and confirms that capital gains derived by a Hong Kong resident from the sale and purchase of shares in a Mainland-listed company will be taxable only in Hong Kong (where there is no such tax).

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