HK-Shen­zhen stock mar­ket link to open on De­cem­ber 5

Main­land tech shares to open up for for­eign­ers

Kuwait Times - - BUSINESS -

SHANG­HAI:

A long-de­layed trad­ing link be­tween the Shen­zhen and Hong Kong stock mar­kets will open De­cem­ber 5, reg­u­la­tors said yes­ter­day, open­ing up the main­land’s tech shares to for­eign in­vestors for the first time. Orig­i­nally slated to launch last year, it was de­layed af­ter a mas­sive mar­ket run-up and sub­se­quent rout. The start date was de­cided by Hong Kong’s Se­cu­ri­ties and Fu­tures Com­mis­sion (SFC) and the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, the SFC said in a state­ment, with its chair­man Carl­son Tong say­ing the two reg­u­la­tors had “es­tab­lished mech­a­nisms to pro­tect the in­tegrity of both mar­kets”.

The scheme will link main­land China’s sec­ond stock ex­change, the world’s eighth largest with a mar­ket cap­i­tal­i­sa­tion of $3.3 tril­lion as of Septem­ber, with the bourse in Hong Kong. The for­mer Bri­tish colony is now a spe­cial ad­min­is­tra­tive re­gion of China but re­mains deeply con­nected to the global fi­nan­cial sys­tem, un­like the main­land’s closed mar­kets. The new link builds on a sim­i­lar “stock con­nect” be­tween Shang­hai and Hong Kong launched two years ago, which gave for­eign­ers new ac­cess to Chi­nese com­pa­nies not quoted else­where, and en­abled main­lan­ders to trade in Hong Kong. The Shen­zhen con­nect will en­able for­eign­ers to buy shares in a to­tal of 863 Chi­nese firms for the first time, au­thor­i­ties said ear­lier.

They in­clude ap­pli­ance man­u­fac­turer Midea-which bought Ger­man ro­bot­ics firm Kuka this year-model car­maker Ras­tar, owner of Span­ish foot­ball club Es­panyol, and Sun­ing Com­merce, part of the group that ac­quired In­ter Mi­lan ear­lier this year. China’s Se­cu­ri­ties Times news­pa­per cited ex­change gen­eral man­ager Wang Jian­jun as say­ing that by value, nearly 60 per­cent of the newly avail­able firms were in new and emerg­ing in­dus­tries, such as in­for­ma­tion tech­nol­ogy and medicine, among oth­ers.

Some of the big­gest are lit­tle-known out­side China, such as Fo­cus Me­dia In­for­ma­tion Tech­nol­ogy, which owns 180,000 tele­vi­sion ad­ver­tis­ing screens across the country and is val­ued at $23 bil­lion, or video sur­veil­lance provider Hangzhou Hikvi­sion Dig­i­tal Tech­nol­ogy, mar­ket cap­i­tal­i­sa­tion $22 bil­lion. But a 6 bil­lion yuan ($900 mil­lion) min­i­mum mar­ket cap­i­tal­i­sa­tion ex­cludes fast-grow­ing smaller com­pa­nies. That could pro­tect out­side in­vestors from some of the wilder gy­ra­tions of Chi­nese share prices. More than 99 per­cent of China’s 116 mil­lion in­vestors are ru­mour-driven small in­vestors, the lat­est of­fi­cial fig­ures showan un­usu­ally high pro­por­tion by global stan­dards.

The main­land’s bourses have been com­pared to casi­nos, with in­sider trad­ing and dra­matic swings in share prices seem­ingly un­con­nected to un­der­ly­ing business prospects. The bench­mark Shang­hai Com­pos­ite In­dex soared by 150 per­cent in the 12 months to June last year, de­spite China’s eco­nomic growth slow­ing, in a bub­ble pro­moted by au­thor­i­ties, be­fore it burst in spec­tac­u­lar fash­ion. “China’s main­land mar­ket is still very heavy on spec­u­la­tion. If in­vestors from Hong Kong side can’t un­der­stand this, they may not come,” Haitong Se­cu­ri­ties an­a­lyst Zhang Qi told AFP.

Sym­bol over sub­stance?

Bei­jing has been try­ing to have Chi­nese A shares in­cluded in the in­flu­en­tial MSCI Emerg­ing Mar­kets In­dex, which could help steer more for­eign port­fo­lio in­vest­ment into the country at a time when au­thor­i­ties are fight­ing off cap­i­tal flight. An­a­lysts say the stock con­nect rep­re­sents an­other ef­fort by Bei­jing to prove to in­ter­na­tional in­vestors its cap­i­tal mar­kets are grad­u­ally open­ing.

It could per­haps strengthen its case for in­clu­sion as the trad­ing quota “could llow more funds to move across the border”, Sam Chi Yung, Hong Kong-based se­nior strate­gist at South China Re­search Lim­ited, told AFP.

Bei­jing main­tains strict for­eign ex­change lim­its as part of the rul­ing party’s tools to con­trol the cur­rency, and the stock con­nect scheme works by en­abling in­vestors to de­posit funds in one ju­ris­dic­tion and make trades in the other. A to­tal of 23.5 bil­lion yuan in cross-border trans­ac­tions will be al­lowed per day un­der the Shen­zhen scheme, reg­u­la­tors said. But de­spite heavy hype be­fore its Novem­ber 2014 launch, the Shang­hai-Hong Kong con­nect has failed to ex­cite traders, with both daily quo­tas for “south­bound” main­land and “north­bound” in­ter­na­tional buy­ers of­ten go­ing un­filled. — AFP

HONG KONG: Peo­ple walk out­side the Hong Kong Stock Ex­change build­ing in Hong Kong. A long-de­layed trad­ing link be­tween the Shen­zhen and Hong Kong stock mar­kets will open De­cem­ber 5, reg­u­la­tors said yes­ter­day open­ing up the main­land’s tech shares to for­eign in­vestors for the first time. —AFP

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.