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bearing this out,” says Colin Brooks, vice chairman
of Securities Services at Standard Chartered.
One of the greatest challenges for the Hong
Kong Connect platforms is the Chinese regulators
themselves. While they are overall supportive of the
linkages, they have limited visibility into the identity
of the investors.
Those buying and selling through the Connect
“There was market skepticism about this
new platform given the existing channels:
QFII and the CIBM. What would be the use
of the Bond Connect? Where is the added
value? ”
MUSHTAQ KAPASI, MD AND CHIEF REPRESENTATIVE, ICMA, ASIA PACIFIC
record and more than double
the total in 2018. The Shanghai-
Hong Kong Northbound Connect
generated 4.67% of total equity
turnover and the Shenzhen-
Hong Kong Northbound Connect
generated 3.29% of the turnover,
in the January - October 2019
period.
“Both Shanghai-Hong Kong
and Shenzhen-Hong Kong Stock
Connects are seen as highly
successful with recent growth
platform are show up only as the ‘Hong Kong
Exchange’. The Chinese regulators would prefer
to have them onshore and trading under their own
names through the Qualified Foreign Institutional
Investor (QFII) program or the renminbi QFII
(RQFII) program. This reality has led to efforts
to make onshore investment more attractive so
that international investors choose to establish
themselves within the country.
“The Chinese authorities are realising that as
the links become successful, foreign investors are
becoming a more significant part of the market. As
foreign investors become a more significant part
of the market, they will need to develop similar
oversight and monitoring tools as other countries,”
says HSBC’s Linschoten.
More QFII activity would help in the development
of the domestic capital markets. Trading that
goes through the Connect platform leaves the
commissions and a host of valuable data in Hong
Kong. Moving activity to the domestic market would
generate more fee income for mainland Chinese
brokers, improving profits and supporting much
needed research.
Reforms have been ongoing, in part to compete
effectively with the Connect programs. They began
around 2016 and culminated in late 2019 with a
proposal to scrap quotas for the entire program and
for individuals QFII participants. QFII and RQFII
remain administratively complex and somewhat
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