Shanghai-HK stock link to accelerate China's reforms

BEIJING - A stock trading program linking the Shanghai and Hong Kong exchanges will speed up reforms of China's stock markets and make them more attractive to investors at home and abroad, according to analysts.

Test trading on the Hong Kong stock market began last week for the Shanghai-Hong Kong Stock Connect, a pilot program designed to allow mutual stock market access for investors in the Chinese mainland and Hong Kong.

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From Aug 11 to Sept 5, securities brokerages on the Chinese mainland may make simulated investments in 14 selected stocks from the Hong Kong stock exchange to test the new system, the Shanghai bourse said.

The tests include regular stock trading and clearing, trading suspension in the case of high typhoon alerts, adapting to different work day systems on the Chinese mainland and Hong Kong, and other possible conditions.

The Hong Kong stock exchange said it will conduct tests for investments in Shanghai between Aug 23 and Sept 13.

The program was first announced in April. A joint circular released by both bourses said there would be a six-month preparation period before official launch of the scheme.

Analysts predict that mutual trading access will be officially launched in mid-October, following technological preparation and tests of both exchanges.

The program will step up the market-oriented reform of the mainland, especially reform in the securities market, and promote the integration of mainland and Hong Kong capital markets, said Dong Dengxin, a financial and securities researcher at Wuhan University of Science and Technology.

Compared with that of Hong Kong, an important global financial center, the mainland's stock market lags behind in terms of openness to global capital, effective supervision and protection for investors.

The program will press the mainland to bring its stock markets up to international standards, with well-functioning laws and regulations, high quality of listed companies and market-oriented initial public offering (IPO) and delisting mechanisms, experts said.

The mechanism will help raise the attractiveness of China's securities market to investors both at home and overseas, according to Dong.