Move to at­tract more global in­vestors

China Daily (Hong Kong) - - VIEWS -

One af­ter another, mea­sures are being taken to pro­mote the trad­ing links be­tween the cap­i­tal mar­kets on the Chi­nese main­land and in the Hong Kong Spe­cial Ad­min­is­tra­tive Re­gion and take ef­fec­tive ac­tion against il­le­gal ac­tiv­i­ties.

The launch of the Shen­zhenHong Kong Stock Con­nect on Monday sig­nals not only the ex­tend­ing of mu­tual ac­cess to the main­land and Hong Kong stock mar­kets but also the fur­ther strength­en­ing of co­op­er­a­tion be­tween the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion and the Hong Kong Se­cu­ri­ties and Fu­tures Com­mis­sion to main­tain mar­ket or­der and pro­tect in­vestors.

Sim­i­lar to their ar­range­ments for the Shang­hai-Hong Kong Stock Con­nect, the first chan­nel al­low­ing mu­tual ac­cess for el­i­gi­ble in­vestors that has been op­er­at­ing smoothly since it was of­fi­cially launched in Novem­ber 2014, the two reg­u­la­tors have agreed and signed a mem­o­ran­dum of un­der­stand­ing on the prin­ci­ples and ar­range­ments for their reg­u­la­tory and en­force­ment co­op­er­a­tion to pro­tect the in­tegrity of both mar­kets, in­clud­ing re­al­time sur­veil­lance by the two watch­dogs of the ac­tiv­ity in their re­spec­tive mar­kets. And with con- tin­gency plans in place for var­i­ous even­tu­al­i­ties and the two stock ex­changes and the clear­ing houses hav­ing com­pleted a se­ries of mar­ket re­hearsals, both reg­u­la­tors are con­fi­dent the sys­tem is good to go. Not only will the Shen­zhenHong Kong Stock Con­nect help re­in­force Hong Kong’s role as an in­ter­na­tional fi­nan­cial cen­ter once it is launched be­cause it will “help glob­ally de­ploy Chi­nese in­vestors who are the last resid­ual pool of cap­i­tal in the world to­day” as Charles Li, chief ex­ec­u­tive of Hong Kong Ex­changes and Clear­ing, has said. It should also serve to boost global in­vestors’ con­fi­dence in in­vest­ing in the main­land mar­ket. For while the Shang­hai Stock Ex­change is dom­i­nated by Sta­te­owned gi­ants such as Sinopec and the main­land’s big banks, and trad­ing through the Shang­hai-Hong Kong Stock Con­nect pro­gram has been some­what lack­lus­ter, many of China’s most suc­cess­ful and in­no­va­tive tech­nol­ogy com­pa­nies and ser­vice providers are listed on the Shen­zhen Stock Ex­change and it has con­sis­tently been the main­land’s best-per­form­ing mar­ket for a while now. Con­cerns about the lack of mar­ket ac­ces­si­bil­ity was one of the rea­sons cited by MSCI for not in­clud­ing the Chi­nese stock mar­ket in its widely tracked emerg­ing-mar­ket in­dex, al­though it did note the Chi­nese au­thor­i­ties have made “sig­nif­i­cant im­prove­ments” in ac­ces­si­bil­ity for global in­vestors.

The launch of the Shen­zhenHong Kong Stock Con­nect shows the gov­ern­ment is con­tin­u­ing to make progress to­ward re­mov­ing bar­ri­ers for in­ter­na­tional in­vestors to di­rectly tap the main­land mar­ket, as it is giv­ing them ac­cess to trade on what is the world’s sev­enth largest stock mar­ket by value and the sec­ond busiest af­ter the New York Stock Ex­change.

And to fur­ther en­rich the va­ri­ety of traded prod­ucts and pro­vide more in­vest­ment op­por­tu­ni­ties and con­ve­nience for do­mes­tic and over­seas in­vestors, the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion and the Hong Kong Se­cu­ri­ties and Fu­tures Com­mis­sion have reached a con­sen­sus on in­clud­ing ex­change-traded funds as el­i­gi­ble se­cu­ri­ties un­der the mu­tual mar­ket ac­cess scheme, with a launch date to be an­nounced sep­a­rately af­ter the Shen­zhen-Hong Kong Stock Con­nect has been in op­er­a­tion for a pe­riod of time and cer­tain con­di­tions sat­is­fied.

The launch of the Shen­zhenHong Kong Stock Con­nect rep­re­sents another step to­ward re­al­iz­ing goal of a law-reg­u­lated cap­i­tal mar­ket with in­ter­na­tional fea­tures.

The au­thor is a se­nior ed­i­tor with China Daily.

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