Hong Kong-China mutual access schemes
To read more:
Market compass for China: publication
Stock connect
Infrastructure
HKEX monthly statistics
Key considerations
- Trade Chinese stocks from Hong Kong
- Funding possible through CNH (offshore) rather than CNY (onshore)
- Investors must open account with a broker (Exchange Participant) to trade A-shares listed on Shanghai Stock Exchange and Shenzhen Stock Exchange
- Investors can have several brokers
Planned and potential developments
- Special Segregated Account (SPSA) model from November 2017 offers delivery versus payment (DVP) settlement
- More exchange-traded securities may be brought into the system
- “ETF Connect” and “IPO connect” are being considered and will be implemented when “relevant conditions” have been met
- Increasing numbers of ETFs and funds and leveraging the programme to access to China market
To read more:
Chinese connection: the new Shenzhen-Hong Kong Stock Connect: article
Bond connect
Infrastructure
- Launched in July 2016
- Initially investments into China only
- Gives offshore investors access to China’s USD 9.3 trillion bond markets (world’s third-largest)
- Complements China Interbank Bond Market Direct (CIBM Direct) scheme launched in February 2016
Key considerations
- No quota limitation, no investment plan requirement
- Trade, clear and settle China bonds with offshore infrastructure only
- Dedicated e-trading interface
- No DVP settlement available for China Central Depository and Clearing
Planned and potential developments
- Investment trades from China to be explored in future
- Refinement of application, clearing and settlement processes likely on an ongoing basis
To read more:
Mutual recognition of funds
Infrastructure
- Launched in December 2015
- Streamlines procedures for Hong Kong and Chinese domiciled funds to be distributed in each other’s markets
- Gives more diverse fund investment products to China and Hong Kong investors
Key considerations
- For managers wanting to set up a Hong Kong fund for investments into China, the Securities and Futures Commission (SFC) two-stream fast-track approval process takes an estimated one month for standard funds approval
- The China Securities Regulatory Commission (CRSC) application process may take longer. Since the launch of the scheme in 2015, ten funds have been approved for distribution into China (as of January 2018)
- Innovative distribution strategies would be one of the key success factors
Planned and potential developments
- Fund managers keen for regulators to re-examine the “50/50” rule
- Hong Kong regulators have been seeking mutual recognition deals with other jurisdictions (Switzerland in December 2016, France in July 2017, and a UK scheme is in discussion) to broaden investor pools open to Hong Kong domiciled funds
Download the publication “Access to China”
