Shenzhen link 'to include small cap ChiNext stocks'
Updated: 2015-11-11 08:04
By Bloomberg in Hong Kong(HK Edition)
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Foreign investors are poised to gain greater access to the mainland's best-performing stocks.
The Shenzhen exchange will include small-cap ChiNext shares in its planned link with Hong Kong, Liu Fuzhong, vice-director of strategy and international relations at the mainland's second-largest bourse, said on the sidelines of a conference in Shanghai. The Shenzhen exchange is conducting internal tests on link infrastructure, though the program's start date is still "uncertain", he said.
Investors have been clamoring for details on the Shenzhen connect amid concern that a $5-trillion rout in mainland shares earlier this year would derail plans to expand the existing cross-border program with Shanghai. The ChiNext Index, used by local traders as a proxy for "new economy" companies in the technology and service industries, has jumped 87 percent this year and is valued at levels more than four times higher than the Shanghai Composite Index.
"The Shenzhen link will include the stocks that represent the new economy, from Shenzhen's main board, ChiNext and SME board," Liu said. The link "is certain to happen and go on. What's uncertain is the timing", he said.
The specific list of companies to be included in the Shenzhen link is still under discussion, Liu said, but he declined to say whether the link will allow one-way or two-way flows with Hong Kong.
Policymakers have given few details about the timing of the program since the mainland's stock-market sell-off started in June. Chief Executive Leung Chun-ying said on May 28 the link may begin in the second half of the year. The city's exchange operator had also outlined a similar time-frame, while a person familiar with the matter said in May the State Council had signed off on the plan.
In a sign of how keenly investors are watching for news on the link, the mainland's stock market surged last week after the central bank published five-month-old comments from central bank governor Zhou Xiaochuan that said the program would start this year. The central bank later said via text message that the comments were taken from a speech on May 27, before the crash in mainland shares made a delay of the program more likely.
Officials have been reviewing plans to expand the exchange link to Shenzhen after starting the Stock Connect program between Shanghai and Hong Kong in November 2014. MSCI Inc has said that giving foreigners more access to Shenzhen is key to getting the nation's stocks included in global benchmark indexes.
Expanding the exchange connect would be part of the mainland's effort to link its financial markets with the rest of the world and boost global usage of the yuan. Beijing's next five-year plan calls for increasing the yuan's convertibility by 2020 as authorities push for its inclusion in the International Monetary Fund's basket of reserve currencies.
The Shenzhen Composite Index added 0.82 percent at the close of trading on Tuesday.
(HK Edition 11/11/2015 page8)