In this newsletter, we provide a snapshot of the principal Asian, US, European and selected international governance and securities law developments of interest to Asian corporates and financial institutions.
Approval in Principle of Shenzhen-Hong Kong Stock Connect
On 16 August 2016, the China Securities Regulatory Commission and the Securities and Futures Commission jointly announced (the "Joint Announcement") the approval, in principle, of the establishment of Shenzhen-Hong Kong Stock Connect. Under Shenzhen-Hong Kong Stock Connect, Hong Kong and international investors will be able to trade in eligible shares listed on the Shenzhen Stock Exchange ("SZSE") through The Stock Exchange of Hong Kong Limited ("SEHK") via a Northbound Shenzhen Trading Link. Likewise, Mainland investors may trade in eligible shares listed on SEHK through SZSE via a Southbound Hong Kong Trading Link.
The principal arrangements for Shenzhen-Hong Kong Stock Connect are similar to those under Shanghai-Hong Kong Stock Connect launched in November 2014. For details of Shanghai-Hong Kong Stock Connect, you may refer to the Governance & Securities Law Focus of January 2015. The other key features of Shenzhen-Hong Kong Stock Connect are set out below:
Northbound Shenzhen Trading Link
For the Northbound Shenzhen Trading Link, eligible stocks will include:
- any constituent stock of the SZSE Component Index and SZSE Small/Mid Cap Innovation Index which has a market capitalisation of RMB6 billion or above; and
- all SZSE-listed shares of companies that have issued both A shares and H shares.
For shares that are listed on the ChiNext Board of SZSE, only institutional professional investors (as defined under the Securities and Futures Ordinance and its related rules and regulations) will be eligible to trade at the initial stage of Shenzhen-Hong Kong Stock Connect. Subject to the resolution of related regulatory issues, other investors may subsequently be allowed to trade such shares.
Southbound Hong Kong Trading Link
For the Southbound Hong Kong Trading Link, eligible stocks will include:
- constituent stocks of the Hang Seng Composite LargeCap Index and Hang Seng Composite MidCap Index;
- any constituent stock of the Hang Seng Composite SmallCap Index which has a market capitalisation of HK$5 billion or above; and
- all SEHK-listed shares of companies that have issued both A shares and H shares.
The Shenzhen-Hong Kong Stock Connect daily quota will be the same as that under Shanghai-Hong Kong Stock Connect, i.e.:
- a daily quota of RMB13 billion for the Northbound Shenzhen Trading Link; and
- a daily quota of RMB10.5 billion for the Southbound Hong Kong Trading Link.
There will be no aggregate quota under Shenzhen-Hong Kong Stock Connect. The aggregate quota under Shanghai-Hong Kong Stock Connect was also abolished with immediate effect on the date of the Joint Announcement.
The launch of Shenzhen-Hong Kong Stock Connect is subject to the grant of all necessary regulatory approvals, and the regulators estimate that it will take approximately four months from the date of the Joint Announcement to complete the technical and operational preparations, including finalizing the relevant trading and clearing rules and systems and putting in place arrangements for cross-boundary regulatory and enforcement cooperation.
The Joint Announcement is available at:
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