The Securities Regulatory Commission said on April 19 that it will deepen cooperation with Hong Kong and adopt these five measures to further expand and optimize the Shanghai-Shenzhen-Hong Kong Stock Connect mechanism, help Hong Kong consolidate and enhance its status as an international financial center, and jointly promote the collaborative development of capital markets between the two places.
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The central government fully supports Hong Kong in maintaining its unique position and advantages over a long period of time. General Secretary Xi Jinping has clearly stated on various occasions that it is necessary to consolidate and enhance Hong Kong's status as an international financial center. On April 12, 2024, the State Council issued “Certain Opinions on Strengthening Supervision and Risk Prevention and Promoting High-Quality Development of the Capital Market” (“Certain Opinions”). The “Certain Opinions” made arrangements such as adhering to coordinating a high level of institutional openness and security in the capital market and expanding and optimizing the cross-border connectivity mechanism of the capital market. The China Securities Regulatory Commission resolutely implements the spirit of General Secretary Xi Jinping's important instructions. In order to cooperate with the implementation of the “Certain Opinions”, it will soon deepen cooperation with Hong Kong on the basis of extensive and in-depth research and listening to opinions, adopt the following 5 measures to further expand and optimize the Shanghai-Shenzhen-Hong Kong Stock Connect mechanism, help Hong Kong consolidate and enhance its status as an international financial center, and jointly promote the collaborative development of the capital markets of the two places.
The first is to relax the scope of eligible products for stock ETFs under the Shanghai-Shenzhen-Hong Kong Stock Connect. Under the guidance of the two local securities regulators, the Shanghai, Shenzhen and Hong Kong Stock Exchange has reached a consensus to moderately relax the average asset management requirements for eligible stock ETFs, reduce the Hong Kong share weight and Hong Kong Stock Connect share rights requirements for Southbound Hong Kong Stock Connect ETF products, and make equal adjustments to the Northbound Shanghai Stock Connect and Shenzhen Stock Connect ETF products to support the construction of the Hong Kong International Asset Management Center.
The second is to include REITs in the Shanghai-Shenzhen-Hong Kong Stock Connect. It is proposed to include eligible REITs from the Mainland and Hong Kong in the Shanghai, Shenzhen, and Hong Kong Stock Exchange standards, based on the general arrangement of the two countries' stock and ETF interconnection systems, to further enrich the variety of Shanghai, Shenzhen, and Hong Kong Stock Connect transactions.
The third is to support the inclusion of RMB stock trading counters in Hong Kong Stock Connect. Since Hong Kong introduced the HKD-RMB dual counter mechanism, the Mainland, the Hong Kong Stock Exchange and clearing companies have actively carried out research on the inclusion of RMB stock counters in Hong Kong Stock Connect. At present, a preliminary agreement has been reached on the relevant business plan. In the next step, the two sides will continue to push forward various preparations such as business plan improvement, rule revisions, technical transformation, and investor education, aiming for an early launch to help internationalize the RMB.
Fourth, optimize mutual fund recognition arrangements. It is proposed to promote a moderate relaxation of the limit on the customer sales ratio of mutual recognition funds, allow the transfer of investment management functions of the Hong Kong Mutual Recognition Fund to overseas asset management agencies with managers and the same group, further optimize mutual fund recognition arrangements, and better meet the diversified investment needs of investors in the two places.
The fifth is to support leading enterprises in the mainland industry to go public in Hong Kong. In the year since the rules of the overseas listing filing management system were issued and implemented, 72 enterprises have completed initial public offering (IPO) filing in Hong Kong. Financing channels for listing in Hong Kong have been unobstructed, which strongly supports the development of mainland enterprises using two markets and two resources. The China Securities Regulatory Commission will further step up communication and coordination efforts with relevant departments to support eligible leading enterprises in the mainland industry to go public and finance in Hong Kong.
In the next step, the China Securities Regulatory Commission will work with the Hong Kong Securities Regulatory Commission and other relevant parties to guide exchanges and settlement companies in the two places to jointly promote the smooth implementation of the above policies and measures as soon as possible.
Editor/Jeffrey