HKEx reacts to joint announcement from SFC and CSRC on mutual stock market access

11 April 2014   Category: News, Asia, China, Hong Kong   By David Macfarlane

Hong Kong Exchanges and Clearing Limited (HKEx) released the following statement on April 10 in response to a joint announcement from Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) on the development of a pilot programme for the establishment of mutual stock market access between mainland China and Hong Kong:

“We note the remarks made by Premier Li Keqiang today at the Boao Forum for Asia Annual Conference 2014 regarding the creation of conditions for the establishment of mutual market access between the Shanghai and Hong Kong stock markets to further promote the opening up of mainland China and Hong Kong’s capital markets and their healthy development. We also note that in a joint announcement of today’s date (April 10), the SFC and the CSRC approved, in principle, the development of a pilot programme for the establishment of mutual stock market access between mainland China and Hong Kong. We welcome this development as an important milestone in the further opening up of mainland China’s capital markets and the promotion of the internationalisation of renminbi. We also believe that this development would provide a new opportunity and create momentum for the further development of the Hong Kong capital markets.

As announced on April 2, 2014, by the board of directors of HKEx, we have been in discussions with our mainland China counterparts regarding the potential establishment of mutual market connectivity initiatives. Such discussions have involved The Stock Exchange of Hong Kong Limited (SEHK), Shanghai Stock Exchange (SSE), Hong Kong Securities Clearing Company Limited (HKSCC) and China Securities Depository and Clearing Corporation Limited (ChinaClear) and have centred on the principles set out in the joint announcement and the following principles:

(i) SEHK and SSE would provide mutual order-routing connectivity and related technical infrastructure to investors in their respective markets to trade eligible shares listed on the other’s market (the “Trading Links”);
(ii) HKSCC and ChinaClear would provide arrangements for the clearing and settlement of trades and the provision of depository, nominee and other related services to investors in mainland China and Hong Kong (the “Clearing Links”); and
(iii) SSE and SEHK would equally share the revenue generated from the Trading Links by way of trading fees on a fair and equitable basis; and ChinaClear and HKSCC would equally share the revenue generated from the Clearing Links by way of clearing fees on the same basis.

We are continuing such discussions with our Mainland counterparts following the above principles and will make a further announcement to update investors and the market in compliance with the SFO and the Listing Rules as and when appropriate. Meanwhile, HKEx’s shareholders and investors should note that no agreement has been entered into at this stage.”

Separately, on China's plan to link the Shanghai and HK bourses, Bill Maldonado, chief investment officer, Asia Pacific and global chief investment officer for equities, HSBC Global Asset Management, remarked: “This is a very positive development which reinforces the reform agenda which is being rolled out in China. Together with the recent announcements on widening of the currency band and increase in quotas it underlines the positive momentum which is building in China. The move further reinforces our confidence in investing in Asia and our positive stance on China where we see long-term opportunities arising from the reform.”