Launch of “Hong Kong-Shenzhen Connect”
The exchange platform between Shenzhen and Hong Kong was officially launched on Monday.
Shenzhen Stock Exchange. (December 1, 2016)
Keystone
The warning was in order on Monday in Hong Kong and Shenzhen, on the first day of trading on the new link platform between the two places offering foreigners unprecedented access to Chinese flagship shares.
Regarded by Beijing as a crucial step in opening up Chinese markets, the “Hong Kong-Shenzhen Connect” allows investors from both exchanges to buy shares elsewhere.
Shortly after the bell rang to open both places, Hong Kong Chief Executive Leung Chun-ying spoke of a “new milestone” on strengthening stock market relations between China and the former British colony that has returned to it. lap in 1997. in fact they are a great conductor between the rest of China and the rest of the world, “he said.
Morning in the red
Both places, however, spent the morning in the red, in a bearish regional context of concerns, following the massive one – off victory in the Italian referendum and the resignation of Matteo Renzi, for the third economy in the eurozone.
In Hong Kong, the Hang Seng composite index gave up 68.68 points in the middle of the day, or 0.30% to 22,496.14 points. The Shenzhen Stock Exchange fell from its 0.63% to 2,071.26 points.
Francis Lun, an analyst at GEO Securities, considered that the launch of the platform was at risk of catching a mouse, and the effects of last year’s Chinese stock market crisis were yet to be felt.
Anxiety
The particular impact of a dramatic fall on Chinese stock markets in the summer of 2015 was delayed by the launch of the Hong Kong-Shenzhen platform. Concerns have recently been heightened by a capital flight related to the fall in the yuan.
“The problem facing China is a liquidity crisis in the banking system,” Lun told AFP. “It’s hard to get money to buy stocks when you run out of cash.”
For foreigners, the platform allows access to 863 Chinese companies listed in Shenzhen, eighth in the world, and in particular certain Chinese badges.
These include the smartphone manufacturer ZTE, the real estate colossus Vanke, the insurer Ping An, or the home appliance producer Midea (bought by the German manufacturer Kuka robots).
Copy of “Hong Kong-Shanghai Connect”
This new mechanism directly copies the operation of the existing two – year stock exchange platform between Shanghai and Hong Kong.
The “Hong Kong-Shanghai Connect” enabled for the first time foreign investors to buy shares, through the former British colony, in yuan of companies listed in mainland China.
However, the door is only ajar: the Shanghai and Shenzhen Stock Exchanges, due to the severe restrictions placed by Beijing on the movement of capital, are almost isolated from the rest of the world.
Unlike Hong Kong, a largely autonomous Chinese territory, whose financial center is closely linked to international markets.
Emerging sectors
Almost 60% (through market capitalization) of companies on the Shenzhen Stock Exchange fall into “emerging sectors” according to their operator. Shanghai is “the most dynamic market” in the country, even according to broker Macquarie, with daily trading volume now greater than that of Shanghai.
However, foreign investors will only have access to companies with a capitalization of at least 6 billion yuan (822 million euros), the threshold designed to protect them from wild fluctuations of Chinese stock markets.
In fact, most of the 116 million stock market investors in mainland China are individuals, whose local markets have earned a reputation as casinos – often isolated from the real activity of companies.
Throw yourself to the rest of the world
In the other direction, the new platform expands to 101 small companies the range of Hong Kong securities that mainland Chinese residents can acquire.
But the need to hold a portfolio worth 500,000 yuan (68,500 euros) in advance should, in practice, continue to exclude the vast majority of Chinese stockbrokers.
“The real meaning of this platform, over a decade – long horizon, is China’s ability to project itself into the rest of the world,” said broker Neil McLean of Instinet. “China does not open its door for fun.”
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