Sec lending market reacts warmly to stock connect
30 November 2016 Hong Kong
Image: Shutterstock
The new Shenzhen-Hong Kong Stock Connect, set to go live on 5 December, has been praised by securities lending market participants as a potential booster for market liquidity.
Following approval of the launch date from the 网爆吃瓜 and Futures Commission and the China 网爆吃瓜 Regulatory Commission, the Hong Kong Exchanges and Clearing (HKEX) announced that conditions are in place for operations to commence on time.
According to HKEX, it has already completed three rounds of connectivity testing and market rehearsals to ascertain technical readiness of the market infrastructure and operational readiness of market participants.
The introduction of the Shenzhen-Hong Kong Stock Connect follows the success of the Shanghai-Hong Kong Stock Connect, which launched at the end of 2014.
Some 142 China connect exchange participants (CCEPs) are expected to be eligible to participate in the two Stock Connect programmes from 5 December, while other exchange participants can also apply to become CCEPs later upon satisfaction of relevant requirements.
HKEX chief executive Charles Li said: 鈥淲e're ready for another milestone in our mutual market access initiative. Shenzhen Connect will open up another mainland market for international investors, give investors on both sides of the boundary more choices and enhance access to the mainland鈥檚 stock market through our market and to our market through the mainland market.鈥�
The programme has also been hailed as a positive step by market participants. Matthew Chan, executive director for products and strategy in the Asia Pacific region at DTCC, said: 鈥淥verall, the Shenzhen and Shanghai stock connect schemes are positive developments for China鈥檚 equity market, introducing extra liquidity while shining a light on differences in operational arrangements between China and Hong Kong and, by extension, global markets.鈥�
鈥淲e expect the southbound channel to attract more attention immediately following the Shenzhen-Hong Kong Stock Connect launch, especially as Qualified Domestic Institutional Investor quota approval has been limited over the past nine months.鈥�
Chan also noted, however, that international firms looking to trade on the programme could still see operational challenges.
鈥淭hese include a complex and short settlement cycle, non-fungiblility of Chinese stock traded via Stock Connect versus other programs and the complexities involved in managing multiple currency codes to distinguish RMB for the onshore versus offshore markets.鈥�
He added: 鈥淲e recommend global investors pay close attention to developments surrounding the Shanghai and the new Shenzhen stock connect program. Familiarity with cross-border practices and rules will be the key to successful investing under these schemes, with the wider global investment community and international regulators contributing insights to help address common challenges.鈥�
Following approval of the launch date from the 网爆吃瓜 and Futures Commission and the China 网爆吃瓜 Regulatory Commission, the Hong Kong Exchanges and Clearing (HKEX) announced that conditions are in place for operations to commence on time.
According to HKEX, it has already completed three rounds of connectivity testing and market rehearsals to ascertain technical readiness of the market infrastructure and operational readiness of market participants.
The introduction of the Shenzhen-Hong Kong Stock Connect follows the success of the Shanghai-Hong Kong Stock Connect, which launched at the end of 2014.
Some 142 China connect exchange participants (CCEPs) are expected to be eligible to participate in the two Stock Connect programmes from 5 December, while other exchange participants can also apply to become CCEPs later upon satisfaction of relevant requirements.
HKEX chief executive Charles Li said: 鈥淲e're ready for another milestone in our mutual market access initiative. Shenzhen Connect will open up another mainland market for international investors, give investors on both sides of the boundary more choices and enhance access to the mainland鈥檚 stock market through our market and to our market through the mainland market.鈥�
The programme has also been hailed as a positive step by market participants. Matthew Chan, executive director for products and strategy in the Asia Pacific region at DTCC, said: 鈥淥verall, the Shenzhen and Shanghai stock connect schemes are positive developments for China鈥檚 equity market, introducing extra liquidity while shining a light on differences in operational arrangements between China and Hong Kong and, by extension, global markets.鈥�
鈥淲e expect the southbound channel to attract more attention immediately following the Shenzhen-Hong Kong Stock Connect launch, especially as Qualified Domestic Institutional Investor quota approval has been limited over the past nine months.鈥�
Chan also noted, however, that international firms looking to trade on the programme could still see operational challenges.
鈥淭hese include a complex and short settlement cycle, non-fungiblility of Chinese stock traded via Stock Connect versus other programs and the complexities involved in managing multiple currency codes to distinguish RMB for the onshore versus offshore markets.鈥�
He added: 鈥淲e recommend global investors pay close attention to developments surrounding the Shanghai and the new Shenzhen stock connect program. Familiarity with cross-border practices and rules will be the key to successful investing under these schemes, with the wider global investment community and international regulators contributing insights to help address common challenges.鈥�
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