Shenzhen exchange explores stock pipeline with Hong Kong -official

Reuters

(Adds official comments, context)

By Michelle Chen

HONG KONG, Aug 27 (Reuters) - Shenzhen is studying a plan to

connect its stock exchange with Hong Kong's stock market,

similar to the scheme planned for Shanghai, and hopes it can be

launched as soon as possible, a government official said on

Wednesday.

"The Shenzhen government has raised this suggestion to the

China Securities Regulatory Commission and the CSRC's opinion is

that we can do some research on the Shenzhen-Hong Kong stock

connect plan," Xiao Zhijia, deputy director-general of

Shenzhen's Office of Financial Development Services, told

Reuters by telephone.

The plan will then need to be discussed with Hong Kong's

stock exchange and the city's regulators following which China's

regulators will then decide when to launch a similar scheme

between Shenzhen and Hong Kong, he said.

He declined to give a specific time frame for the launch

saying it depended on the success of the Hong Kong-Shanghai

scheme.

"It is quite flexible and the power of decision is in the

CSRC's hands," he said.

The Shenzhen stock exchange, a rival to Shanghai's market,

looks to emulate the Nasdaq in the United States by focusing on

companies in their early growth stages. It also has some

big-name listings, including China Vanke, the

country's biggest residential property developer.

Shenzhen stocks, in particular those on the ChiNext

board, have consistently outperformed the Shanghai

Exchange which has concentrated on listing large-cap blue chip

firms in recent years.

A foreign fund manager, speaking on condition of anonymity,

said that he believed foreign investors would be far more

enthusiastic about investing in Shenzhen companies, which tend

to feature more technology and consumer names.

These stocks represent the future of China's economy rather

than the blue-chip banks, insurers, and other state-owned giants

that dominate Shanghai's index, according to some investors.

Authorities expect the landmark stock-connect programme

between Shanghai and Hong Kong - another step in China's efforts

to open up its markets - will launch in October. Regulators and

market participants are racing to test mechanisms to ensure

readiness.

While China investors anticipate a wave of institutional

money will flow into the mainland's relatively undervalued

markets, Hong Kong stock punters are hoping Chinese money will

boost trading volumes and lift stocks.

The Shanghai Composite Index rose to eight-month highs last

week, and Hong Kong's Hang Seng Index reached a more than

six-year high this week as investors hailed the latest

development as a catalyst for further market gains.

A Shenzhen-Hong Kong connection hinges on the success of the

Shanghai-Hong Kong link, an analyst told Reuters, who expected

such a scheme to be launched in the first quarter of 2015 at the

earliest.

(Additional reporting by Grace Li and Saikat Chatterjee in HONG

KONG and Pete Sweeney in BEIJING; Editing by Richard Borsuk and

Jacqueline Wong)

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