The Shenzhen-Hong Kong Stock Connect is another step toward the internationalization of the A-share market, and it's only a matter of time before A shares are included in major global indices, the head of Hong Kong Exchanges and Clearing (HKEX) said on Sunday.
There are a number of ways HKEX provides greater cross-boundary access for investors from the Chinese mainland and around the world, "and we will continue looking at ways to broaden Stock Connect, include new asset classes, and build more bridges so investors will have more opportunities and more choices," HKEX Chief Executive Charles Li wrote in a blog post on Sunday.
The Securities and Futures Commission (SFC) in Hong Kong and the China Securities Regulatory Commission (CSRC) on Tuesday announced the approval, in principle, of the structure of the Shenzhen-Hong Kong Stock Connect.
This program will provide mutual stock market access between Hong Kong and Shenzhen, the Xinhua News Agency reported on Wednesday.
Li said there was speculation that valuation gaps would narrow with the launch of the Shanghai-Hong Kong Connect, but that didn't happen.
"The mainland market is mostly made up of retail investors who can be fickle, while Hong Kong is dominated by institutional and value investors," he wrote, noting that the result is a pricing gap that will probably be sustained in the short term, while long term the pricing will likely converge as stocks become fungible and investors have more options.
Tuesday's approval for the Shenzhen link reaffirms China's commitment to reform, but it is unlikely to be a deal-maker for inclusion in the MSCI, Reuters reported on Thursday, citing a New York-based index provider, investors and analysts.
In June, MSCI rejected the addition of Chinese A shares to its emerging markets benchmark, suggesting that China must do to open up its market, according to media reports.
