HK stock exchange chief wants China fund houses on through train
Hong Kong Exchanges and Clearing (HKEx) chief executive Charles Li Xiaojia said on Monday that allowing mainland Chinese fund houses to invest in Hong Kong stocks under the Stock Connect scheme would boost turnover of the so-called through train programme.
Li said most mainland funds now do not have mandate to invest outside the mainland and cannot invest in Hong Kong stocks under the Stock Connect scheme between Hong Kong and Shanghai that allows cross-border trading.
"Mainland funds not investing in the Stock Connect scheme is one of the reasons for the weak southbound investment (investment coming from the mainland to Hong Kong through the Stock Connect scheme). Fund houses are trying to get shareholders to vote to change their mandate so that they can invest in Hong Kong stocks via the scheme.
"When this obstacle is removed, southbound investment will improve," Li said, after co-hosting with HKEx chairman Chow Chung-kong the market opening ceremony for the first trading day of the Year of the Goat.
The Stock Connect scheme has generated far greater turnover in northbound trading than southbound. While the volume of stock trading by international investors handling mainland’s A shares through the HKEx reached over 100 billion yuan in the past two months, southbound investment from the mainland reached only 25 billion yuan.
Mainland funds not investing in the Stock Connect scheme is one of the reasons for the weak southbound investment (investment coming from the mainland to Hong Kong through the Stock Connect scheme)
Li said northbound investment also faced similar problems as some international fund houses are yet to get the approval of their investors or regulators to buy mainland Chinese stocks under the scheme.
Li said short selling of mainland stocks, which is to be allowed from next Monday, would not add to volatility because of a number of safeguard measures such as the requirement for investors to borrow stocks at a margin before they can short sell them.
Chairman Chow Chung-kong said: "The short selling rules under the scheme are aimed at allowing investors to hedge their risks, not speculate."
Chow said the exchange this year would carry out other reforms to improve the Stock Connect programme and expressed hope that the Shenzhen-Hong Kong market connect scheme would be launched soon.
"We are awaiting a policy announcement from the mainland and Hong Kong regulators. Once they set the policy, we will work out the detail regulations governing cross-border trading between Hong Kong and Shenzhen in a few months," Chow said.
