Smooth operation has been seen in the stock exchanges connectivity mechanism between the Chinese mainland and Hong Kong since its launch, which has promoted the cooperation and development of the two sides and received favorable response from the markets. Till the end of June 2018, the accumulative trading volume of Shanghai – Hong Kong Stock Connect and Shenzhen – Hong Kong Stock Connect had reached RMB11.67 trillion. In particular, the Shanghai Stock Connect (northbound) reached the accumulated trading volume of RMB4.96 trillion, the average daily trading volume of RMB5.897 billion, and the accumulated net inflow of RMB281.059 billion; those for Shenzhen Stock Connect (northbound) were RMB1.94 trillion, RMB5.324 billion, and RMB226.639 billion respectively; and those for the southbound Hong Kong Stock Connects under Shanghai – Hong Kong Stock Connect and Shenzhen – Hong Kong Stock Connect were RMB4.77 trillion, RMB7.315 billion and RMB695.13 billion. The scale of the southbound Hong Kong Stock Connect under Shanghai – Hong Kong Stock Connect has kept expanding, increasing from 268 stocks at the beginning of its launch to 317; and that of the southbound Hong Kong Stock Connect under Shenzhen – Hong Kong Stock Connect has also increased from 417 to 462.
On May 7, 2018, Hang Seng Indexes Company Limited released the "Consultation Conclusions on the Eligibility of Foreign Companies, Stapled Securities, Weighted Voting Right Companies for Inclusion in Hang Seng Composite Index (HSCI)". It announced that the stocks of foreign companies with their primary listing in Hong Kong, stapled securities and weighted voting right companies would be eligible for inclusion in the HSCI, which would start in the third quarter of 2018 in Hong Kong. Previously, these three types of securities were not included in the HSCI.
The Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) have noticed this major change in the HSCI, and thus carried out a survey among some securities dealers and investors in Chinese mainland to learn about the opinions of relevant parties. Most investors said that they were not familiar with these new types of securities; some put forward the difficulty of grasping the business condition and financial regulations of foreign companies; some were confused about stapled securities; and some hoped that the weighted voting right companies would be first launched in the Chinese mainland so that they could make judgment after getting familiar with it. Some securities companies believed that investors in the Chinese mainland had not contacted with the above three types of securities, and thus the investors were strange to their complexity and risks, and there was no relevant investor education. As to weighted voting right companies, it was a new thing even in Hong Kong. Therefore, the investors in the Chinese mainland should not participate till there would be a number of such companies and certain market basis in Hong Kong. Other securities companies said that the sample space was a key element for index compiling, and adding these three types of securities would change the scope of securities of the HSCI, the basis for the scope of stocks of Hong Kong Stock Connect. However, the HSCI, as an authoritative index reflecting the trend of the Hong Kong market, has not made any adjustment accordingly.
With regard to the above survey results, the SSE and the SZSE believed upon careful analysis and evaluation that the adjustment to the scope of stock selection of the HSCI belongs to the special situation specified in Article 55 of the "SSE Measures for Implementation of Shanghai – Hong Kong Stock Connect" and Article 56 of the "SZSE Measures for Implementation of Shenzhen – Hong Kong Stock Connect" (i.e., the stocks that involve in other special situations accredited by the Exchange will not be included in stocks of Hong Kong Stock Connect). Therefore, the two exchanges will not include these three types of securities newly added in the HSCI into the stocks of Hong Kong Stock Connect.
The stock exchanges connectivity mechanism between the Chinese mainland and Hong Kong has played an important role in the two-way opening-up of China's capital market and also represented a successful example of cooperation between exchanges in the Chinese mainland and Hong Kong. With the continuous promotion of the markets' openness, the scope of the stocks of Hong Kong Stock Connect will keep improving and expanding. Next, the SSE and the SZSE will steadfastly promote the reform and opening-up in the capital market and further the negotiation and cooperation with Hong Kong Exchanges and Clearing Limited. And they will join hands with all market participants to make in-depth assessment on the market concerns, organize their members to make preparatory work, actively expand the stock scope for the stock exchanges connectivity mechanism, and keep optimizing such mechanism.