China to Expand Exchange Link With Increased Quota, More Shares

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China will expand the trading quota and the number of eligible shares for the Shanghai-Hong Kong stock link, according to the nation’s securities regulator.

China Securities Regulatory Commission Vice Chairman Fang Xinghai made the comments at a seminar posted on the CSRC’s website, which didn’t give further details. The regulator will also promote a planned link with Shenzhen, he said. The Shanghai link will be expanded once the new trading channel begins, which is unlikely to be this year, Charles Li, chief executive officer of the Hong Kong Exchanges & Clearing Ltd., said in a briefing in the city on Tuesday.

The stock connect, which celebrated its one-year anniversary on Tuesday, is part of the country’s effort to open financial markets to the rest of the world and boost global usage of the yuan. The link has been a success from an operational standpoint, handling more than $320 billion of turnover through October without any notable technical glitches, Li said in a blog post this month.

The link allows as much as 23.5 billion yuan ($3.7 billion) of daily cross-border purchases in companies on the SSE 180 Index and SSE 380 Index, which are listed on the Shanghai Stock Exchange, as well as constituents of the Hang Seng Composite LargeCap Index and Hang Seng Composite MidCap Index, which Hong Kong Exchanges & Clearing Ltd. lists. Stocks with dual listings in Shanghai and Hong Kong are also eligible.

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Quotas cap aggregate net purchases at 300 billion yuan in Shanghai and 250 billion yuan in Hong Kong. About 569 stocks are eligible for northbound trading, or net purchases of Shanghai stocks, and 295 for southbound, according to statements from the Shanghai and Hong Kong bourses.

The Shanghai-Hong Kong stocks link can be considered a success because it has expanded the pool of stocks available for global and mainland Chinese traders and allows overseas investors to buy mainland shares without having to tap into their Qualified Foreign Institutional Investor quotas, said Mark Mobius, executive chairman of the Emerging Markets Group at Franklin Templeton Investment.

The start of the Shenzhen link is more likely next year and preparations may take another two months even after a formal announcement, Li said at Tuesday’s briefing.

— With assistance by Feifei Shen, and Li Liu

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