Authorities are set to allow stock block trading in the link that connects Hong Kong and mainland China, opening up further to support struggling markets amid sluggish economic growth.
(Bloomberg) — Authorities are set to allow stock block trading in the link that connects Hong Kong and mainland China, opening up further to support struggling markets amid sluggish economic growth.
Regulators “reached consensus” to include block trading into Shanghai and Shenzhen Stock Connect to facilitate trading, China Securities Regulatory Commission and Hong Kong’s Securities and Futures Commission said in a joint statement on Friday. The stock exchanges on both sides will announce the operational details and the official launch date in due course, they said.
The move follows pledges by Chinese authorities to enliven the stock market and boost investor sentiment as China’s economy struggles. China is keen to attract foreign capital to its market, but also wary of its impact. It has successively over the past years relaxed foreign quotas and set up trading links for stocks, bonds and exchange-traded funds.
“It could boost northbound turnover with greater overseas investor participation, particularly institutional investors,” said Sharnie Wong, a Bloomberg Intelligence analyst.
SFC Chief Executive Officer Julia Leung said in a statement that allowing block trading would enable best execution on large transactions and minimize the price impact on the market.
“This initiative will enhance the price discovery functions of both markets and encourage more overseas investors to participate in the A-share market through Stock Connect,” she said.
Almost 100 billion yuan ($13.8 billion) traded northbound each day in the stock connect link in the first quarter. That was down 8% from a year earlier. Trading southbound was HK$37.5 billion ($4.8 billion) a day in the same period, up 6%.
–With assistance from John Cheng.
(Updates with comment in 4th paragraph.)
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