Hong Kong Exchanges & Clearing Ltd (HKEx) chief executive officer Charles Li (李小加) said he believes the link with Shenzhen would help cement the territory’s status as the gateway to China’s multitrillion-dollar investor base.
Li said in an interview with Bloomberg Television that he expects the flow of money from the mainland to increase after Hong Kong and Chinese regulators on Tuesday announced plans to link the city’s bourse to the Shenzhen Stock Exchange.
The initiative would double daily limits for equity purchases from the mainland and scrap total quotas, which were introduced with the launch of the first link, to the Shanghai Stock Exchange, in late 2014.
Photo: AP/Vincent Yu
The long-delayed Shenzhen connect is part of China’s efforts to open its capital markets and increase its global influence. The nation has about US$20 trillion deposited in banks, of which about a half will be invested in equities and bonds in the next two decades, Li said.
“The long term significance of the connect is the southbound,” Li said. “Hong Kong’s job is to bring the world to Hong Kong, so China can invest in the world at this full stop in Hong Kong.”
Chinese investors bought a net of about 200 billion yuan (US$30.14 billion) of shares in Hong Kong, using more than 80 percent of the aggregate quota, since the Shanghai link was started in November 2014, according to data compiled by Bloomberg.
The southbound and northbound total limits will be scrapped, the announcements said.
Li is looking to boost the attractiveness of Hong Kong’s stocks after the 30-day average value of shares traded in the territory fell to an almost two-year low in June.
While the benchmark Hong Kong equity gauge has rebounded back into a bull market after plunging in the wake of China’s rout last year, its longer-term performance is poor relative to global peers.
The new link will help the territory attract foreign companies to list in Hong Kong, Li said, with the aim of pulling in mainland investor money.
“Hopefully over the time we will get more international listings, international products and then those products would become much more interesting for the southbound investors,” Li said. “And we will be the primary destination.”
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