Xu Zhengyu: Connectivity closely links mainland and international capital to play Hong Kong's role as a hub

The Zhitong Finance App learned that on November 26, Hong Kong's Secretary for Financial Services and the Treasury, Mr Hui Ching-yu, said in his opening speech at the HKEX China Forum that the Mainland and Hong Kong capital markets have been connected for 10 years. Over the past ten years, the two places have successively launched the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, and Bond Connect, as well as the swap launched last year, which has not only consolidated the cooperation between the two markets, but also closely linked the country's capital market to the international market, and played an important role in the global financial system.

Xu Zhengyu pointed out that Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect have become the preferred way for international investors to invest in the mainland securities market. Since its launch in 2014, the average daily trading volume of Shanghai and Shenzhen Stock Connect has increased from 6 billion yuan to 136 billion yuan as of October this year, an increase of 23 times, accounting for about 8% of the total trading volume in the mainland market. What is more worth mentioning is that more than 70% of the international capital from the mainland's A-share market flows through the Shanghai-Shenzhen Stock Connect, fully demonstrating Hong Kong's role as a hub in connecting the mainland and international markets.

Hong Kong Stock Connect has also achieved impressive results. The average daily trading volume increased from about HK$900 million at the beginning of launch to HK$44 billion as of October this year, an increase of 46 times, accounting for about 17% of the total trading volume in the Hong Kong market. Furthermore, the Hong Kong Stock Connect has brought a total net capital inflow of over HK$3.4 trillion to the Hong Kong stock market, effectively boosting the liquidity and vitality of the Hong Kong market.

The launch of Bond Connect in 2017 has further expanded the scope of connectivity, providing a convenient channel for international investors to participate in the mainland bond market. By the end of September this year, the total amount of mainland bonds held by overseas institutions through channels such as Bond Connect exceeded RMB 4.400 billion, while the average daily turnover of Beixiangtong increased 19 times from 2.2 billion yuan at the beginning of launch to 43 billion yuan in the first three quarters of this year. Bond Connect has become an important bridge for international investors to participate in the mainland bond market. In the next step, we will enrich the liquidity management related facilities for offshore investors to invest in onshore bonds, and actively study and launch various products and arrangements such as repurchases and collateral for onshore RMB bonds in due course.

Looking back over the past ten years, connectivity has shown three core characteristics: vitality, cohesion, and extensibility. The vitality of connectivity comes from its strong market growth and vitality. Starting with the stock market, connectivity gradually expanded into the fields of bonds, financial management, and derivatives exchange. Through continuous optimization of trading mechanisms, it has attracted more investor participation and promoted the integration and prosperity of the two markets.

The cohesiveness of connectivity is reflected in fostering close cooperation between regulators and market participants in the two regions. The interconnection mechanism has not only won the consensus of all parties in the mainland and Hong Kong, but has also won recognition from the international market for the country's high-quality financial assets, successfully promoted the inclusion of A-shares in international indices, and enhanced the international status of the mainland market.

The extensibility of connectivity represents the limitless possibilities of the future. In addition to the existing Shanghai and Shenzhen Stock Connect, Bond Connect and Swap Connect, Hong Kong is actively promoting more innovative mechanisms, including new projects such as the Housing Trust Fund (REITs) Connect and Southbound RMB Stock Trading Counter, to provide investors with more diversified choices and further deepen the linkage between the two markets.

He said that in the future, they will work together to continue to deepen capital market cooperation between the two places, create more opportunities for the country's economic and financial development, create more opportunities for international investors, and make new contributions to Hong Kong's market development.