China today launched its landmark Shanghai-Hong Kong Stock Connect, providing a multi-billion-dollar channels for investors to play in both markets.
Hong Kong’s Chief Executive C Y Leung hailed the scheme as one of “historic significance for both Hong Kong and the mainland markets.”
“The scheme creates synergy for the two stock markets by expanding the sources of investment and boosting their competitiveness,” Leung said.
Following the launch today, shares in both Shanghai and Hong Kong opened around 1 per cent higher with Hong Kong stocks moving up 225.68 points to open at 24,313.06.
The exchange was launched after weeks of delay due to the ongoing pro-democracy protests in Hong Kong.
The Stock Connect will facilitate the gradual opening of the mainland’s capital account and the internationalisation of the RMB as an investment currency for global investors, thereby reinforcing Hong Kong’s position as an international financial centre and a premier offshore renminbi hub, he said.
“It is a breakthrough in the opening up of China’s financial markets and an important milestone in the development of Hong Kong as a unique gateway between the mainland and international investors,” Chairman of the Hong Kong Exchanges and Clearing Limited C K Chow said at the launching ceremony.
Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said the priority now is to ensure that the scheme operates smoothly, while regulators will consider what room there is to improve the mechanism and expand the scheme in an orderly manner, state-run Xinhua news agency reported.
On the Southbound link, institutional investors and individuals with over USD 83,000 in their brokerage accounts may trade Hong Kong shares through a broker on the Shanghai stock market; while heading Northbound, Hong Kong investors and international investors with Hong Kong brokerage accounts may trade shares listed on the Shanghai stock market.
The pilot scheme comes with limitations on the total RMB value of shares that can be traded through the exchanges.
For the Northbound link, there is an aggregate cap of USD 50 billion and about USD two billion daily.
The aggregate Southbound trading quota is USD 41 billion and USD 1.75 billion daily.
To ensure a successful launch of the scheme, which marks a milestone in the liberalisation of capital controls on the mainland, Beijing will exempt Chinese investors from paying capital gains tax on stock-trading profits through the scheme for three years.
The tax has also been waived for international investors for now but there’s no time frame.
The USD 3,300 daily exchange cap is being scrapped from today to allow investors to get their requisite volume of yuan to trade A shares.
Several banks and brokers said they have received large yuan orders from customers, the Hong Kong based South China Morning Post reported.