Shanghai-Hong Kong Link to Open Next Week

China said the Shanghai-Hong Kong exchange link will debut in a week giving foreign investors unprecedented access to its $4.2 trillion stock market.

What Is The Shanghai-Hong Kong Link

The exchange link is a step for China toward opening up the capital account.  This link will increase the use of the yuan and will turn Shanghai into a focal point of international finance.  It will also give access to foreign investors into Chinese companies.  The Shanghai-Hong Kong Link will allow a net of 23.5 billion yuan ($3.8 billion) of daily cross-border purchases.  The program is slated to begin on November 17th, 2014.

At A Glance, the Shanghai-Hong Kong stock connect…

  • Was announced by Chinese premier Li Keqiang in April
  • Will allow global investors, institutional and retail, to trade Shanghai ‘A’ shares via the Hong Kong stock exchange
  • Only institutional investors abroad with secured quota from the government can invest directly in China’s domestic markets.

Challenges of the Shanghai-Hong Kong Link

  • Quota restrictions could inhibit growth
  • Regulatory and tax concerns