Stock exchanges in Hong Kong and mainland China are considering adding shares from Shanghai’s Nasdaq-style STAR Market to a program connecting the two bourses, a move which would open the board to foreign investors.
China’s securities regulator said Friday that adding shares from the STAR Market, the Shanghai Stock Exchange’s technology-focused board, to the Hong Kong’s exchange would be a “win-win situation” for the country’s financial market and for international investors.
Discussions of the potential link-up come as China continues its push to revamp and open up its markets to foreign capital.
According to the China Securities Regulatory Commission, including STAR shares on the bourse operated by Hong Kong Exchanges and Clearing would meet rising demand for Chinese equities abroad and help the young market grow. The connection would be forged through the Stock Connect program, which makes Chinese stocks available to buyers in Hong Kong’s global finance hub.
China’s central government has controlled foreign access to mainland financial markets partly by restricting access to its domestic stock exchanges. To spur greater investment, the state has recently taken steps to loosen its tight control over international participation.
HKEX on Friday unveiled a partnership with the Shenzhen Stock Exchange which allows exchange-traded funds to be cross-listed between their markets, launching the first ETFs covered under the deal on the same day. The agreement builds on earlier steps to gradually open up mainland bourses through Hong Kong.
In 2014, HKEX launched the Shanghai-Hong Kong Stock Connect program to open up trading in certain shares to overseas investors. The initiative was expanded to the Shenzhen Stock Exchange in 2016, and added some mainland bonds the following year.
Launched in 2019, the STAR Market has faced growing pains as Chinese officials attempt to develop the board while making sure it isn’t undermined by rule breakers. In September, the market’s internal regulators warned investors and companies conducting initial public offerings against colluding to suppress share prices.
The STAR board is expecting a major boost as fintech Ant Group prepares its $35 billion dual listing between Shanghai and Hong Kong, potentially the largest IPO ever.
Ant Group’s successful public debut would add a feather in the caps of China’s bourses, which have reportedly hosted a record $47.5 billion of IPOs and other listings so far in 2020.