Shanghai Securities News｜SSE, SZSE, and HKEX Look Ahead on 10th Anniversary of Stock Connect

November 17, 2024 marked the 10th anniversary of the Stock Connect between capital markets of the Chinese mainland and Hong Kong. On this occasion, the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and Hong Kong Exchanges and Clearing Limited (HKEX) have jointly expressed their visions for the next decade of high-level, two-way opening of the capital markets.

According to SSE, since the launch of the Shanghai-Hong Kong Stock Connect, the foreign capital has accumulated a total trading volume of 68.92 trillion yuan through the Northbound Stock Connect under the Shanghai-Hong Kong Stock Connect; the average daily trading volume of the Northbound Stock Connect under the Shanghai-Hong Kong Stock Connect has dramatically increased from 4.7 billion yuan within the first month of its launch in 2014 to the current 133 billion yuan. On the other hand, the accumulated trading volume of Chinese mainland investors has reached 23.13 trillion yuan through the Southbound Stock Connect under the Shanghai-Hong Kong Stock Connect; the average daily trading volume through the Southbound Stock Connect under the Shanghai-Hong Kong Stock Connect has grown from 800 million Hong Kong dollars in its first month post-launch in 2014 to the current 54 billion Hong Kong dollars. Up to now, the average daily trading volumes of the Northbound Stock Connect and Southbound Stock Connect under the Shanghai-Hong Kong Stock Connect have respectively accounted for 13.8% and 8.1% of the total average daily trading volumes in the A-share market of SSE and the Hong Kong stock market. The SSE also stated that the past decade’s development marked a significant phase of growth for the young Chinese capital market. Looking into the next decade, as the Chinese capital market continues to advance toward global integration, numerous new challenges and complex issues difficulties are expected to emerge. The connection between the two places will never stagnate, with all market participants striving to make more breakthroughs.

On December 5, 2016, the Shenzhen-Hong Kong Stock Connect was launched, extending the connectivity between the Hong Kong and Chinese mainland capital markets to the Shenzhen market. According to the SZSE, as of November 15, 2024, international investors from over 130 countries or regions had participated in the trading through the Northbound Stock Connect under the Shenzhen-Hong Kong Stock Connect, with a total trading volume of 93 trillion yuan via the Shenzhen-Hong Kong Stock Connect. The total trading volume of the Northbound Stock Connect under the Shenzhen-Hong Kong Stock Connect has reached 75 trillion yuan, while the total trading volume of the Southbound Stock Connect under the Shenzhen-Hong Kong Stock Connect amounts to 18 trillion Hong Kong dollars. Since 2024, the Northbound Stock Connect under the Shenzhen-Hong Kong Stock Connect has recorded an average daily trading volume of 72 billion yuan, representing an average annual growth of 76% and accounting for 6% of the total stock trading volume in the Shenzhen market. Meanwhile, the Southbound Stock Connect under the Shenzhen-Hong Kong Stock Connect has achieved an average daily trading volume of 19.3 billion Hong Kong dollars, reflecting an average growth of 89% and accounting for 9% of the total trading volume in the Hong Kong stock market. The SZSE stated that it would fully leverage the geographical advantages of the Shenzhen-Hong Kong region and continuously strengthen the communication and collaboration with relevant parties including the HKEX.

Over the past decade, through the joint efforts of regulatory bodies and financial institutions in both regions, the connect mechanisms, typically including the Shanghai-Hong Kong/Shenzhen-Hong Kong Stock Connect, Bond Connect, and Swap Connect, have undergone continuous expansion and upgrades, establishing a solid foundation for the coordinated development of the markets in both regions. As of now, there have been over 3,300 eligible stocks under the Shanghai-Hong Kong/Shenzhen-Hong Kong Stock Connect, covering 90% of the total market capitalization of listed companies in Shanghai, Shenzhen, and Hong Kong markets, and accounting for over 80% of their trading volumes.

The inclusion of companies with different voting rights structures, biotechnology firms, foreign companies, and those listed on the SSE STAR Market has significantly diversified the range of eligible stocks under the Shanghai-Hong Kong/Shenzhen-Hong Kong Stock Connect. This development facilitates domestic and international investors with greater flexibility in asset allocation and provides access to the benefits from both markets. As of September 2024, the total market value of securities assets held by mainland investors through the Southbound Stock Connect had exceeded 3.3 trillion Hong Kong dollars, which is over 200 times the amount at the end of 2014. The total value of mainland securities assets (including stocks and bonds) held by overseas investors has reached nearly 7.6 trillion yuan, demonstrating an increase of more than 4.7 trillion yuan compared to June 2018, when A-shares were first included into MSCI index.

The HKEX stated that it would continue to collaborate with mainland partners and market participants, closely monito market dynamics under the leadership of regulatory bodies in both regions, continuously optimize the financial infrastructure for connectivity, and expand connectivity-related products and services.

As the Stock Connect celebrates its 10th anniversary, the Financial Secretary of the Hong Kong SAR, Paul Chan Mo-po, also published a blog to extend his congratulations. He pointed out that as the interconnected development between the markets of Hong Kong and the Chinese mainland continued to strengthen, Hong Kong's unique role in the international market became increasingly prominent and attractive. In the future, Hong Kong would continue to exert efforts to promote the further deepening and development of connectivity.

According to the HKEX, the HKEX Connect Summit will be held on November 18, 2024. According to the introduction, the summit aims to celebrate the 10th anniversary of the Stock Connect, while reviewing how the innovation and cooperation between the financial markets of Hong Kong and the Chinese mainland over the past decade has driven the high-level opening of China's capital markets, significantly enhanced the attractiveness and international influence of China's capital markets, and further strengthened their integration with international capital.

Excerpt translated from Shanghai Securities News on November 17, 2024

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