HKEX seeks better stock connects with mainland exchanges via blockchain tech

Hong Kong Exchanges and Clearing (HKEX) hopes to introduce blockchain technologies to build a better stock connect with bourses in the Chinese mainland, which analysts said is technically feasible and will help the city consolidate its financial position.

Blockchain technology can make the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect smoother. HKEX hopes to introduce the technology, said Charles Li Xiaojia, CEO of HKEX, during the Hong Kong Fintech Week, the Hong Kong Economic Journal reported.

The HKEX has different settlement times than stock exchanges in the mainland. Mainland exchanges’ deliveries and payments happen at the same time, whereas transactions on the HKEX are settled two business days after each trade (T+2), Li said.

Blockchain technology can help the HKEX solve delays in northbound trading, said Li.

The HKEX floated the idea of a private market run on blockchain in early 2017. The technology was also mentioned multiple times in the HKEX’s Strategic Plan 2019-21, published in February.

Li’s latest announcement, though short on details, shows HKEX’s intention to improve its existing stock connect program with its counterparts in Shanghai and Shenzhen, analysts said.

The blockchain initiative is expected to make its stock connects with Shanghai and Shenzhen operate more smoothly, Li Daxiao, chief economist at Shenzhen-based Yingda Securities, said.

The large capital advantage of the mainland will help Hong Kong consolidate its position as an international financial center, Li Daxiao noted.