HONG KONG: Hong Kong and Shanghai will link their stock exchanges on Nov. 17 that will grant foreign investors unprecedented access to China’s $3.9 trillion stock market and create the world’s third-largest equity market.
The long-awaited landmark stock connect project will, for the first time, allow global investors to trade Chinese stocks directly from Hong Kong, while mainland investors will be able to access the Hong Kong equities market.
The launch also forms part of China’s push to widen the use of the yuan, with Canada being singled out at the weekend as the latest trading hub for the currency. In the past two years, China has set up clearing banks in London, Singapore, Qatar and other financial hubs to help facilitate trade transactions and investment denominated in the yuan.
“This marks an important milestone in the liberalization of the mainland’s capital account,” Norman Chan, chief executive of the Hong Kong Monetary Authority said in a statement after the launch of the Stock Connect scheme.
“The linking of the Hong Kong and Shanghai stock markets will also propel the development of offshore renminbi business in Hong Kong to new heights,” he added. The offshore yuan CNH=D3 and Chinese shares rose on the back of the announcement.
Linking the Hong Kong and Shanghai stock markets will effectively create the world’s third-largest equity market with a $5.6 trillion single market capitalization, behind the New York Stock Exchange and NASDAQ OMX and ahead of London and Tokyo, according to Allianz Global Investors.
China already operates several cross-border investment schemes, but these are restricted to specific firms that must apply for a license to participate.
Stock exchanges in mainland China have seen trading volumes surge from Oct. 29 as investors positioned themselves for an imminent launch of the scheme, but the Chinese authorities pressed pause on the project at the last minute without providing an explanation for the delay.
