SSE President Cai Jianchu: Shanghai-Hong Kong Stock Connect Has Become an Important Channel for Mainland Investment in Hong Kong Market and Overseas Investment in Mainland Market

Translated from STCN

On November 18, Cai Jianchun, President of Shanghai Stock Exchange (SSE), said during his keynote speech at the HKEX Connect Summit that over ten years ago, regulators and financial practitioners in both the Mainland and Hong Kong SAR, with determination and good faith in reform and opening-up, have explored effective pathways to the two-way opening of capital markets and the internationalization of the RMB.

"In 2012 at a tea house in Shenzhen, senior executives from the Shanghai and Hong Kong exchanges sketched out the path to connect trades between the two stock markets on a small piece of napkin. This was the initial blueprint for the Shanghai-Hong Kong Stock Connect," Cai Jianchun said. "Two years later, the Shanghai-Hong Kong Stock Connect was successfully launched."

In the decade since its launch, the connect between the Mainland and Hong Kong stock markets has continued to widen. Notable developments include the introduction of special segregated accounts for northbound trading in 2015, the launch of the Shenzhen-Hong Kong Stock Connect in 2016 with the removal of the overall quota limit, the two-way quadrupling of the daily quotas in 2018, the inclusion of stocks of companies with different voting rights structures in 2019, the inclusion of stocks on the STAR Market in 2021, the inclusion of ETF products as eligible securities in 2022, and the two-way expansion of the trading calendar and broadening of the stock scope in 2023.

"As of now, there are 1,349 stocks and 143 ETFs tradable under the Shanghai-Hong Kong Stock Connect, with 545 stocks and 17 ETFs in the southbound trading list. The cumulative trading volume of the Shanghai-Hong Kong Stock Connect has reached RMB 93 trillion, making it an important channel for Mainland investment in the Hong Kong market and for overseas investment in the Mainland market," Cai Jianchun said.

Cai Jianchun stated that over the past decade, the SSE has taken the launch of the Shanghai-Hong Kong Stock Connect as a starting point to align with the country's broader strategy for high-level openness, promote the orderly opening-up of capital markets, and deepen cooperation with overseas markets.

In June 2019, seven businesses of the Shanghai-London Stock Connect were implemented; in 2022, the scope of the depository receipt connectivity mechanism was expanded to Switzerland and Germany. The first batch of products for the China-Japan ETF Connectivity was launched in 2019, followed by the successful implementation of the Shanghai-Hong Kong ETF Connectivity and the Shanghai-Singapore ETF Connectivity. Positive progress has been made in cross-border index-based investment, tracking almost all broad-based indexes of major global markets. A-shares have been included in the international mainstream indexes, and the participation of overseas investors has continued to rise, with their trading share in the Shanghai market rising to 14%.

Cai Jianchun mentioned that the SSE is pursue all-round reforms to boost growth, enhance quality and efficiency, and promote openness, with the aim to build a world-class exchange as soon as possible. He said that under the guidance of China Securities Regulatory Commission and Securities and Futures Commission of Hong Kong, the SSE will work closely with the Hong Kong and Shenzhen exchanges to continue optimizing the connect scheme, deepen financial cooperation and openness between the Mainland and Hong Kong SAR, and serve domestic and overseas investors. They will create an environment where various types of capital are willing to come, stay, and thrive, delivering mutual benefits and win-win results to the capital markets in both regions, spurring the high-quality development of capital markets and serving the Chinese modernization.

Cai Jianchun also invited overseas investors to participate in the Chinese Mainland market, together building an open, inclusive, and efficient market ecosystem, and sharing the benefits of China's high-quality economic development.

The above information is provided for reference purposes only and does not constitute investment advice.