Stock Connect mechanism benefits both mainland and HK markets

Sunday marked the 10th anniversary of the capital market connectivity mechanism established between the Chinese mainland and the Hong Kong Special Administrative Region.

With the launch of the Shanghai-Hong Kong Stock Connect, investors could entrust local brokerages to buy and sell stocks in other stock markets, creating a new capital market-opening model on the mainland. Since then, the Shenzhen-Hong Kong Stock Connect, Bond Connect, Swap Connect and other mechanisms have been launched, advancing the connectivity mechanism in coverage and flexibility, and making it a vivid embodiment of the successful practice of "one country, two systems".

In the first three quarters of 2024, the average daily turnover of northbound and southbound transactions through the Stock Connect links between the mainland and Hong Kong reached 123.3 billion yuan ($17.03 billion) and HK$38.3 billion ($4.91 billion), respectively, a 21-fold and 40-fold increase in 10 years. In the past 10 years, cross-boundary transactions through this mechanism have reached 177 trillion yuan, bolstering the stability and prosperity of capital markets on the mainland and in Hong Kong.

Behind the massive turnover is the ever-increasing maturity and improvement of the connectivity mechanism, enabling more investors to participate and providing more investment products. As of September, more than 260 Hong Kong brokers had participated in the Shanghai and Shenzhen stock connect business, and more than 100 mainland securities companies had launched their HK Stock Connect businesses.

The past decade has also seen how the mainland's capital market has become attractive globally by promoting the inclusion of the mainland's A-shares and government bonds in major global indexes. As of September, the total amount of mainland securities assets held by overseas investors was nearly 7.6 trillion yuan, 4.7 trillion yuan more than in June 2018, when the MSCI indexes first included A-shares.

The capital markets of the mainland and Hong Kong have experienced fluctuations in the past 10 years, but the northbound and southbound capital flow channels were a source of stability.

The connectivity mechanism proves Hong Kong remains an important link between the mainland's capital market and the world, and that the mainland remains a valuable long-term investment destination for overseas investors.

ECONOMIC DAILY