In a joint announcement on April 10, 2014 (the “Joint Announcement”), the China Securities Regulatory Commission (the “CSRC”) and the Hong Kong Securities and Futures Commission (the “SFC”) unveiled “Shanghai-Hong Kong Stock Connect” (“Stock Connect”), a pilot program to establish mutual stock market access between Mainland China and Hong Kong. Stock Connect is expected to be formally launched by October 2014.
Background
Efforts to establish a direct cross-market trading platform are not new. In August 2007, a similar pilot program (confined to the City of Tianjin) was launched. Under this program Mainland investors were allowed to directly purchase Hong Kong stocks. Due to various reasons, including fears of a destabilizing outflow of funds into Hong Kong, the Tianjin pilot program was shelved indefinitely after a short three-month run.
Currently, the only way Mainland investors can invest in stocks listed on non-Mainland stock exchanges is through the Qualified Domestic Institutional Investor (“QDII”) program. Similarly, foreign investors do not have unlimited access to stocks listed on the Mainland stock exchanges. They are only allowed to invest in B-shares (shares of companies based in China that are traded on the Shanghai Stock Exchange in U.S. dollars or on the Shenzhen Stock exchange in Hong Kong dollars), and to obtain exposure to A-shares (shares that are traded on the two Mainland stock exchanges in Renminbi) through the Qualified Foreign Institutional Investor (“QFII”) program and the Renminbi Qualified Foreign Institutional Investor (“RQFII”) program under licenses issued by the CSRC and quotas granted by the State Administration of Foreign Exchange.
The CSRC and the SFC have also been in active discussions with the SFC to create a mutual recognition platform for locally domiciled funds in Hong Kong and Mainland China (the “Fund Mutual Recognition Program”), which, if adopted, will enable eligible funds in either market to be distributed in the other.
Principal Elements of Stock Connect
Northbound Trading Link and Southbound Trading Link
Under Stock Connect, a Northbound Trading Link and a Southbound Trading Link will be formed. Under the Northbound Trading Link, Hong Kong investors will be able to place orders to trade eligible shares listed on the Shanghai Stock Exchange, while under the Southbound Trading Link, Mainland investors will be able to place orders to trade eligible shares listed on the Stock Exchange of Hong Kong Limited (the “SEHK”).
Quotas
Initially, trading through Stock Connect will be subject to a maximum aggregate cross-border investment quota of RMB 300 billion (USD 48.3 billion) in the case of the Northbound Trading Link and RMB 250 billion (USD 40.2 billion) in the case of the Southbound Trading Link, as well as a daily quota which will be monitored on a real time basis. The daily quotas have been initially set at RMB 13 billion (USD 2.1 billion) in the case of the Northbound Trading Link and RMB 10.5 billion (USD 1.7 billion) in the case of the Southbound Trading Link. Although the initial quotas under Stock Connect are not as large as the quotas granted under the other cross-border securities investment programs1, the Joint Announcement expressly provides that the initial quotas may be adjusted in future.
Eligible Investors
Initially, Mainland investors eligible to participate in the Southbound Trading Link will be limited to institutional investors and individual investors who hold an aggregate balance of not less than RMB 500,000 in their securities and cash accounts. The Joint Announcement is silent on any eligibility requirements for investors in Hong Kong.
Eligible Shares
Shares eligible for trading through the Northbound Trading Link will be all the constituents of the SSE 180 Index and SSE 380 Index, and all SSE listed companies that have issued both A shares and H shares (shares of Mainland companies that are listed on the SEHK).
Shares eligible for trading through the Southbound Trading Link will be all the constituents of the Hang Seng Composite LargeCap Index and Hang Seng Composite MidCap Index, and all companies listed simultaneously on both SSE and SEHK.
Funds publicly traded in SSE and SEHK are currently not included among the eligible shares. We believe such funds will instead be governed by the Fund Mutual Recognition Program.
Governing Rules
Listed companies will continue to be subject only to their local listing and other regulations. Similarly, the rules of the market where the trading and clearing activities occur will apply to those activities.
Clearing and Foreign Exchange Conversion
Cross-border clearing will be conducted through a link to be established by China Securities Depository and Clearing Corporation Limited and Hong Kong Securities Clearing Company Limited. The Joint Announcement is silent on how the RMB-Forex conversion will be conducted for such cross-border stock investments.
Conclusion
Stock Connect is seen as an important step in the opening up of China’s capital markets and the promotion of RMB internationalization. The impact of Stock Connect on the Mainland and Hong Kong stock exchanges and existing QDII, QFII and RQFII cross-border trading programs is also expected to be significant.
End Notes
1 As of March 28, 2014, the aggregated quotas granted under QDII program, QFII program and RQFII Program are, respectively, USD 86.593 billion, USD 53.578 billion and RMB 200.5 billion (USD 32.2 billion).
2014年4月10日，中国证券监督管理委员会（“中国证监会”）与香港证券及期货事务监察委员会（“香港证监会”）发布联合公告（“联合公告”），推出沪港股票市场交易互联互通（“沪港通”）试点，实现中国内地与香港之间股票市场交易的互联互通。预期，沪港通将在2014年10月前正式启动。
背景
在此之前，曾进行过建立跨市场股票直接交易平台的尝试。2007年8月，与此类似的港股直通车试点在天津启动，允许内地个人投资者直接购买港股。出于各种原因，包括担心大量资金涌入香港而影响市场稳定，港股直通车试点在启动仅三个月后即被无限期推迟。
目前，内地投资者只有一种途径，即通过合格境内机构投资者（“QDII”）计划，投资在非境内证券交易所上市交易的股票。与此类似，外国投资者只能通过有限的渠道，投资在内地证券交易所上市交易的股票，并只能投资B股（在上海证券交易所上市交易的、以美元结算的内地企业股份以及在深圳证券交易所上市交易的、以港币结算的内地企业股份），以及通过经中国证监会批准的并获得国家外汇管理局批准的额度的合格境外机构投资者（“QFII”）和人民币合格境外机构投资者（“RQFII”）计划，投资A股（在内地两家证券交易所上市交易的、以人民币买卖和结算的股票）。
此外，中国证监会和香港证监会正在积极磋商设立内地与香港基金互认计划（“基金互认”），该计划如经批准，将会使一地合格基金可在另一地销售。
沪港通主要内容
沪股通与港股通
沪港通将由沪股通和港股通两部分组成。沪股通指香港投资者可以申报买卖在上海证券交易所上市交易的合格股票；港股通指内地投资者可申报买卖在香港联合交易所有限公司（“港交所”）上市交易的合格股票。
投资额度
试点初期，对沪港通项下的投资实行总量管理，沪股通总额度为3000亿元人民币（约合483亿美元），港股通总额度为2500亿元人民币（约合402亿美元）。同时设置每日额度，实行实时监控。沪股通每日额度为130亿元人民币（约合21亿美元），港股通每日额度为105亿元人民币（约合17亿美元）。虽然沪港通的初始额度不及其它跨境证券投资试点计划下的额度1，联合公告内明确规定投资额度以后可以调整。
合格投资者
试点初期，参与港股通的境内投资者将仅限于机构投资者，以及证券账户及资金账户余额合计不低于50万元人民币的个人投资者。联合公告未对香港投资者的资格要求进行规定。
投资标的
沪股通的股票范围将是上海证券交易所上证180指数、上证380指数的成份股，以及上海证券交易所上市的A股＋H股（在港交所上市交易的内地公司股票）的公司股票。
港股通的股票范围将是港交所恒生综合大型股指数、恒生综合中型股指数的成份股和同时在港交所和上海证券交易所上市的A＋H股公司股票。
目前，在上海证券交易所和港交所公开交易的基金不被作为投资标的。我们认为，上述基金将适用基金互认计划。
适用规定
上市公司将继续受上市地上市规则和其它规定监管。与此类似，交易结算活动将遵守交易结算发生地市场的规定和规则。
结算与外汇汇兑
跨境结算将通过中国证券登记结算有限责任公司和香港中央结算有限公司所将建立的结算通道完成。对于跨境证券投资的人民币-外币如何汇兑问题，联合公告未作规定。
结论
沪港通被视为是中国资本市场对外开放的重要内容，且将会促进人民币国际化。预计，沪港通将会对内地证券交易市场、香港证券交易市场以及现有QDII、QFII和RQFII跨境证券投资计划产生重大影响。
1 截至2014年3月28日，QDII、QFII和RQFII计划项下已批准的总额度分别为 865.93亿美元、535.78亿美元和 2005亿元人民币（约合322亿美元）。
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Wells-ChristopherThis article was originally published by Bingham McCutchen LLP.