Stock connect to start in November

Qi Bin, director of the international cooperation department at the CSRC [Photo/VCG]

The long-awaited Shenzhen-Hong Kong Stock Connect is expected to start in mid-to late November, a move that makes it more likely that domestic stocks will be included in MSCI Inc's main benchmarks, according to China's securities regulator.

Technical preparations for the stock connect will take place from August to November, with the program scheduled to begin in mid-to late November, said Qi Bin, director of the international cooperation department at the China Securities Regulatory Commission.

The Shenzhen-Hong Kong Stock Connect, which allows mainland investors to buy Hong Kong stocks and vice versa, had been expected for more than a year following a similar program between Shanghai and Hong Kong in 2014.

On Aug 16, the State Council approved the plan to connect a second mainland stock exchange with Hong Kong's.

"We have made a lot of effort to further open Chinese capital markets, and the Shenzhen-Hong Kong Stock Connect can play a positive role in helping domestic stocks be included in MSCI Inc's main benchmarks," said Qi.

The global share index compiler MSCI Inc in June rejected including Chinese mainland-listed A shares in its prominent emerging markets index. MSCI said that it would retain the option to include the A shares as part of its next market classification review in 2017.

According to Qi, China's A share market is the world's second-largest market. It is also the largest emerging capital market and the fastest-growing one, so a global index without A shares is incomplete.

"The inclusion of yuan-denominated A shares in an MSCI Inc index is a historical certainty that will eventually happen," said Qi.

A feasibility study into a third stock connect, between the Shanghai and London exchanges is currently under way and maintains smooth progress, Qi added.

"The Shenzhen-Hong Kong Stock Connect should move China further along the road to MSCI inclusion and we see it as a significant catalyst for Chinese markets, particularly at a time when fundamental strength and industrial profitability are building," said Douglas Morton, head of research at Northern Trust Capital Markets Asia.

China's securities regulator released a draft on Aug 26 detailing the expansion of an initiative that further opens the A-share stock market to investors. The draft revises the regulations for the Shanghai-Hong Kong Stock Connect, expanding their range to include the Shenzhen-Hong Kong Stock Connect.

Zhang Yu contributed to this story.