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Hong Kong Bourse Surges on China Stock Market Access Report

Hong Kong Exchanges & Clearing Ltd. (388) jumped the most in more than a year after a newspaper reported that Shanghai’s bourse may pass stock orders for overseas markets to it for execution.

Investors may also be able to directly buy mainland-listed stocks through the Hong Kong exchange, the 21st Century Business Herald said on its website, without saying where it got the information. Hong Kong Exchanges, known as HKEx, soared 5.4 percent, the most since January 2013, to HK$126, before trading was suspended at 3:12 p.m.

Hong Kong and China are in talks to expand mutual market access, paving the way for the cross-selling of funds and easier access to capital markets for investors and companies. The People’s Bank of China said in January last year that it has started preparations for the qualified domestic individual investor program, or QDII2, which will enable individuals to invest in overseas capital markets.

“QDII2 has been talked about for a while,” said Linus Yip, a strategist at First Shanghai Securities Ltd. who owns HKEx shares. “It’s good for HKEx but it would depend on the quota amount, and whether investors would like to put their stake” in Chinese shares.

Hong Kong Exchanges declined to comment on the 21st Century Business Herald report.

Mutual Market

“Achieving a breakthrough in mutual market access via partnership with mainland counterparties is part of HKEx’s Group Strategic Plan 2013-2015,” Hong Kong Exchanges said in an e-mailed statement in response to questions on the progress of talks on mutual market access. “HKEx will continue its efforts in this regard.”

Two calls to the China Securities Regulatory Commission went unanswered. Shanghai’s exchange operator didn’t immediately respond to questions sent by fax from Bloomberg News.

The technology required for the arrangement has been put into the Shanghai exchange’s 2014 work plan, according to the 21st Century Business Herald report. The quota for purchases for the plan hasn’t been decided yet, the newspaper said.

Hong Kong Exchanges has been building closer ties with mainland bourses. The exchange in 2012 formed a joint venture to develop index-linked and equity derivative products with its mainland Chinese counterparts.

The city’s bourse, which plans to announce new commodity products, wants partnership with China’s exchanges, global markets co-head Romnesh Lamba said today at a conference.

Expanded Program

In August 2007, China unveiled a so-called “through-train” program, in which citizens could invest directly in Hong Kong stocks, helping to push the benchmark Hang Seng Index to a record high that October. China scrapped the plan in January 2010 and instead expanded a program under which Chinese institutions can invest in overseas markets.

The People’s Bank of China has approved a plan for trials in the cities of Guangzhou and Shenzhen that allows qualified individuals to make investments overseas, Shanghai Securities News reported in June, citing Wang Jingwu, head at the central bank’s Guangzhou branch. Plan for the trials have been submitted to the State Council for approval, the report said.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Tan Hwee Ann, Allen Wan

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