The Hong Kong-Shanghai Stock Connect celebrates its first anniversary, but what was hailed as the big opening for Chinese markets hasn’t been quite as successful as investors hoped. Meg Teckman reports.
It's been one year since the launch of the Hong Kong-Shanghai stock connect. But the investment link hasn't been as booming a success as hoped. Touted as the biggest opportunity for foreign investors to get into the then-surging Chinese market, the money just hasn't flowed in. With turnovers this year averaging well below the allowed quotas. Valuations on each side of the border are also facing a widening gap, with mainland stocks growing comparatively more expensive. HKEx CEO, Charles Li: (SOUNDBITE) (English) CEO, HONG KONG EXCHANGES AND CLEARING, CHARLES LI, SAYING: "With two markets, you only just allow people to make a value judgment to go to a cheaper market to buy, but does not allow traders to be able to arbitrage the differences away. So as long as the trading remain to be in two market, in a non-fungible manner, differences will continue to remain. But hopefully the differences will shrink over time when the investors on both sides are much closer in understanding each other's perspectives." This is all partially due to China's market rally and crash this year with Shanghai stocks still down around 30 percent from June's peak. However, Hong Kong Exchanges and Clearing has fared better than its northern counterpart even though the summer slump. The next hurdle for HKEx will be the eventual linkup with a closer partner on the mainland: the Shenzhen stock exchange. Despite previous statements from the bourse, the connection with the mainland's second largest stock market - which is home to some of the country's burgeoning tech stocks - is unlikely to get Beijing's permission to launch by the end of the year. ENDS