Further interconnection!
On December 24, the Shanghai and Shenzhen Stock Exchange announced that in order to continuously optimize the interconnection mechanism between the mainland and Hong Kong markets and enrich the existing objects of interconnection, according to the joint announcement of the CSRC of the two places, Shanghai Stock Exchange, Shenzhen Stock Exchange, Hong Kong Exchanges and Clearing Co., Ltd China Securities Depository and Clearing Co., Ltd. reached a consensus on the overall scheme of integrating ETF into the subject matter of interconnection.
In the next step, Shanghai Shenzhen Hong Kong Stock Exchange and China Clearing will pay close attention to the business and technical preparations related to the inclusion of ETF into the subject matter, including modifying relevant rules and soliciting public opinions. It is expected to take about 6 months to prepare.
enrich varieties and improve investor structure
The inclusion of ETF into the interconnection target is another landmark achievement of the upgrading of the interconnection mechanism, which will make the interconnection spot ecological chain more complete and further promote the mainland and Hong Kong markets to create a win-win situation. On the one hand, the inclusion of ETF into the interconnection target can enrich the investment channels and transaction varieties of domestic and foreign investors, which is conducive to more convenient and effective allocation of each other’s market resources by domestic and foreign investors; On the other hand, the inclusion of ETF into the interconnection target will further improve the investor structure and promote the healthy development of ETF market.
Shen Bing, director of the International Department of the CSRC, said at the joint seminar on the positioning and Prospect of the Hong Kong International Financial Center on December 9 that we should continue to improve the interconnection mechanism, facilitate global investors to participate in the mainland market, further expand and enrich the transaction targets and risk management tools, promote the inclusion of ETFs in the interconnection targets, and pay close attention to improving the transaction calendar arrangement.
Shen Bing pointed out that the Shanghai Shenzhen Hong Kong stock connect is a major measure to deepen cooperation between the two capital markets. Since the launch of Shanghai Hong Kong stock connect and Shenzhen Hong Kong stock connect in 2014 and 2016, the two places have continuously optimized and improved the interconnection system and mechanism, significantly expanded the daily quota, implemented north-south “see through” supervision, and gradually included companies with different voting right structures, unprofitable biotechnology companies and science and Innovation Board stocks. The successive implementation of these policies and measures has promoted the effective play of the two links mechanism, especially for improving the investor structure of the mainland market, introducing long-term allocation of funds and improving the quality of market operation.
By the end of October 2021, the total net inflow of Shanghai and Shenzhen Stock connect funds was 1527.1 billion yuan, and the total net inflow of Hong Kong stock connect funds was 2139.7 billion Hong Kong dollars. The two-way flow remained stable and orderly.
the two-way opening level has been continuously improved
In recent years, the continuous expansion and scale of the standard of Shanghai Shenzhen Hong Kong stock connect have promoted the interconnection and opening of the capital market.
In November this year, the Shanghai Hong Kong stock connect celebrated its seventh anniversary. The Hong Kong Stock Exchange pointed out that after seven years of stable operation, the transactions of Shanghai Shenzhen Hong Kong stock connect have continued to be active and reached new highs, and have become the main channel for cross-border asset allocation of Chinese and foreign investors.
As of November 10, the average daily turnover of North Shanghai Stock connect and Shenzhen Stock connect this year has reached 122.26 billion yuan, an increase of 35% over the same period last year. The average daily turnover of South Hong Kong stock connect this year has reached 44.06 billion Hong Kong dollars, an increase of 87% over the same period last year. The cumulative turnover of the North Shanghai Stock connect and the Shenzhen Stock connect in the past seven years has reached 64 trillion yuan, with a cumulative turnover of 1.5 trillion yuan, and a net inflow into the mainland stock market. The total amount of mainland stocks held by Hong Kong and overseas investors through Shanghai Stock connect and Shenzhen Stock connect continued to grow, from 86.5 billion yuan at the end of 2014 to 2.6 trillion yuan on November 10, 2021.
As of November 10, the cumulative turnover of southbound Hong Kong stock connect in the past seven years had reached HK $23.1 trillion, with a cumulative turnover of HK $2.1 trillion. Mainland funds had net inflows into Hong Kong stocks. The total amount of Hong Kong stocks held by mainland investors through Hong Kong stock connect continued to rise, from HK $13.1 billion at the end of 2014 to HK $2.2 trillion on November 10, 2021.
On December 5, Shenzhen Hong Kong stock connect also celebrated its fifth anniversary. According to the data of Shenzhen Stock Exchange, over the past five years, market institutions and investors in both places have actively participated in Shenzhen Hong Kong stock connect, promoting the continuous and rapid growth of the transaction scale of Shenzhen Hong Kong stock connect. As of December 5, the cumulative transaction amount of Shenzhen Hong Kong stock connect was 41.9 trillion yuan, with an average annual growth of 94.5%, becoming an important window for the two-way opening of China’s capital market.
Since May 2018, the daily quota of Shenzhen Stock connect has increased from 13 billion yuan to 52 billion yuan, and that of Hong Kong stock connect has increased from 10.5 billion yuan to 42 billion yuan, which has improved the convenience of foreign long-term institutional investors to participate in the A-share market, provided important support for the inclusion of A-Shares in MSCI, FTSE Russell and other international indexes, and demonstrated China’s determination and confidence in expanding the opening of the capital market to the outside world.
promote the high-level institutional opening of the capital market
There is no doubt that the pace of opening up the capital market will continue to expand.
On November 23, Fang Xinghai, vice chairman of the CSRC, introduced at the 2021 China Singapore (Chongqing) strategic connectivity demonstration project financial summit that in recent years, the CSRC has launched a series of new two-way opening-up measures, and China’s capital market has achieved remarkable results in opening to the outside world.
First, the opening of the market is deepening. From January to October 2021, foreign investors accumulated a net inflow of about 240.976 billion yuan through QFII, Shanghai and Shenzhen Stock connect and other channels. By the end of October 2021, the circulation market value of A-Shares held by foreign investors was 3.67 trillion yuan, accounting for about 4.97%.
Secondly, the industry access was fully liberalized. Since 2021, JPMorgan Chase and Goldman Sachs (China) have been newly established as two wholly-owned foreign securities companies, and fidelity and luberman as two wholly-owned fund management companies. At present, eight foreign-owned securities companies, three wholly foreign-owned fund management companies and one wholly foreign-owned futures company have been approved to establish, and some have officially started business.
Finally, product opening has been steadily promoted. The scope of international varieties of commodity futures and options continues to expand. Nine varieties have been opened to foreign investors, including two international varieties of crude oil and palm oil options in 2021. ETF interworking between Shanghai, Shenzhen and Hong Kong and ETF interworking between China and Japan have been launched one after another.
Fang Xinghai said that the CSRC will promote the high-level institutional opening of the capital market, focus on the reform of the registration system, continue to strengthen the construction of the capital market system and improve the market depth and liquidity. We will continue to optimize and expand cross-border investment channels such as connectivity, enrich product supply and supporting systems for cross-border investment, and facilitate cross-border investment and risk management. Strengthen regulatory cooperation and information sharing among regulators, and improve cross-border capital flows and risk monitoring and prevention mechanisms. Improve the completeness, transparency and predictability of systems and rules, and consolidate and improve the market-oriented, legal and international business and investment environment.
(China Securities Journal)
