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Thursday, January 04, 2018, 22:10
Proposed equity connect will open up HK-mainland IPO markets
By Edith Lu
Thursday, January 04, 2018, 22:10 By Edith Lu

In this Aug 16, 2016 photo, the flag of the Hong Kong Exchanges and Clearing Limited (right) is hoisted in Hong Kong. (ANTHONY WALLACE / AFP)

Investors in the Chinese mainland and Hong Kong will be able to buy initial public offering shares in each others’ markets after the proposed Primary Equity Connect scheme takes effect, Hong Kong Exchanges and Clearing says.

The proposed scheme will be part of the medium- and long-term plans of the stock market operator to enhance interactions between mainland and Hong Kong financial markets, Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, said in an interview with Thursday’s Shanghai Securities Journal.

After the hardware connects, mainland and Hong Kong would have more cooperation on regulation, culture, concept and laws

Charles Li, HKEx chief

Financial flows between Hong Kong and the mainland have strengthened in recent years as the Shanghai-Hong Kong Stock Connect (2014), Shenzhen-Hong Kong Stock Connect (2016) and Bond Connect (last year) were cemented, letting mainland and  Hong Kong-based investors snap up equities and bonds in each others’ markets reciprocally. 

ALSO READ: Bond connect to cement HK's role as international finance hub

Li said market connections in the secondary equity and bond market had made it possible for mainland investors to invest in the world from their home base but it is still not enough. 

“The door has opened and the contents (asset classes and trading products) shall be filled in,” Li reiterated. 

There are good reasons for both sides to embrace the reciprocal connection in the primary IPO market. Mainland investors would have access to foreign listings and high-quality international investment assets, helping them diversify. 

On Hong Kong’s side, Primary Equity Connect would let international companies access the mainland’s vast domestic savings and boost Hong Kong as a global listing destination. 

The reciprocal financial market connections between Hong Kong and the mainland are regarded as an important change in Hong Kong’s market last year, according to Li. Other changes include revisions to investor structures and listed company structures. 

“The various financial market connections open the mainland capital market and enhance liquidity in Hong Kong market, which represents Hong Kong’s role as a converter,” Li added. 

READ MORE: 'HKEX set to improve and expand services'

“After the hardware connects, mainland and Hong Kong would have more cooperation on regulation, culture, concept and laws,” he said. 

Looking forward, Li believed Hong Kong would still play its special role in positive interaction between the mainland market and other overseas markets against the backdrop of the Belt and Road Initiative and the Guangdong-Hong Kong-Macao Bay Area.

 

edithlu@chinadailyhk.com

 


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