No ‘big bang’ for Shanghai-Hong Kong stock connect

11 August 2014   Category: News, Asia, China, Global, Hong Kong   By Derek Au

Hong Kong Exchanges and Clearing (HKEx) believes a steady launch of the long-awaited Shanghai-Hong Kong stock connect scheme is more important than creating a “big bang”.

HKEx provided an update on the stock exchange connectivity scheme, which will enable investors in Hong Kong and the Mainland to trade on the corresponding market, during its results announcement. The bourse said the scheme is “only the beginning of a long and historic opening”, and expects continued improvements to follow.

According to the announcement, the bourse is currently finalising draft amendments to the rules and operational procedures. It will “seek appropriate approvals with related authorities, and communicate the amended rules and operational procedures with [the] market in due course”.

HKEx said it has completed the internal systems development and related tests, and is currently conducting four-party interface tests with the Shanghai Stock Exchange (SSE) and state-owned clearing house, China Securities Depository and Clearing (CSDC). The test for market participants commenced on July 2, and market rehearsals will be conducted from the end of August to mid-September.

HKEx added that tax issues under the scheme are close to a resolution, while a discussion on rights issues is underway. Issues surrounding securities borrowing and lending have largely been resolved, it said. The bourse revealed 110 participants, which occupy around an 80% market share, have submitted applications to take part in the cross-border trading scheme.

Recent reports have said that the Shanghai-Hong Kong stock connect scheme will debut on  October 13. Instead of directly commenting on the reported date, the bourse reiterated “it should take approximately six months from the announcement to complete the preparation for formal launch”. The scheme was unveiled by regulators on April 10.