Hong Kong-Shanghai Connect: Shanghai market opens its doors to foreign investors

Most foreign investors can now access to Chinese stocks directly thanks to the Hong Kong-Shanghai Connect.

The Hong Kong-Shanghai Connect, a trading scheme opening Shanghai's stockmarket to foreign investors, launched this week. Most foreign investors can now access Shanghai directly for the first time, while mainland Chinese have a new route to international markets via Hong Kong.

Every day, up to $2.1bn dollars may flow into China, while slightly less can go south. On the programme's first day, international investors used up their Shanghai quota by lunchtime. Mainland buyers filled just a fifth of theirs all day.

What the commentators said

The Connect scheme kicked off with confetti and a ceremonial gong. But "the party didn't last long", said Alex Frangos in The Wall Street Journal.

Advertisement - Article continues below

Global investors duly snapped up Shanghai shares that had previously been "walled off" from them, notably SAIC Motor, China's top car maker, and liquor giant Kweichow Moutai. Yet mainland inventors "seemed in no rush" to get their hands on shares in Hong Kong.

Perhaps that's not surprising: anyone rich enough to qualify for the programme's $81,550 minimum threshold "may already have found a way to get their money past China's capital controls into a Hong Kong brokerage account".

The lukewarm start shouldn't obscure the importance of the scheme, said the FT. Among other aims, the gradual opening of China's financial markets is intended to help promote the acceptance of the renminbi as a global currency. A key obstacle to this so far has been the "paltry investment opportunities" open to those who hold redbacks'.

Last year, international investors had renminbi assets worth just $250bn to choose from, compared to $55trn of assets denominated in dollars. An expanding renminbi market will make it easier to start reducing China's reliance on dollar-denominated Treasuries.

"Washington must start preparing for the day when it no longer has a captive buyer for its bonds across the Pacific."




Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019

Most Popular


House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020

Have small companies lost their edge?

SPONSORED CONTENT – The tectonic plates beneath the modern investing landscape appear to have started moving in new directions
26 Jun 2020