10-Year Anniversary of Stock Connect

This Sunday marks a significant milestone: the 10th anniversary of the revolutionary capital market connectivity mechanism linking the Chinese mainland with the Hong Kong Special Administrative Region (SAR). Launched with the Shanghai-Hong Kong Stock Connect in 2014, this innovative system has allowed investors to buy and sell stocks across markets with ease, forging a new model for capital market openness in the region.

Expansion and Success of Stock Connect

Since its inception, not only has the system expanded its reach with initiatives like the Shenzhen-Hong Kong Stock Connect, Bond Connect, and Swap Connect, but it has also become a testament to the successful implementation of the “one country, two systems” principle, highlighting the seamless flow of capital between distinctly different economic systems.

Remarkable Growth Metrics

Remarkable growth metrics tell the story of success: In the first three quarters of 2024, the average daily turnover via these Stock Connect links surged to an impressive 123.3 billion yuan (about $17.03 billion) for northbound transactions and HK$38.3 billion ($4.91 billion) for southbound trades. This reflects an astounding 21-fold increase for northbound and a staggering 40-fold increase for southbound transactions over the decade. Cumulatively, cross-boundary transactions under this system have reached a jaw-dropping 177 trillion yuan, enhancing the stability and prosperity of both mainland and Hong Kong capital markets.

Increasing Maturity of Connectivity Mechanisms

This significant turnover can be attributed to the increasing maturity of the connectivity mechanisms, allowing a larger pool of investors to access a diverse array of investment products. As of September, over 260 Hong Kong brokers have engaged in the Shanghai and Shenzhen stock connect business, while more than 100 mainland securities companies have joined in on the HK Stock Connect.

Global Appeal of Mainland China's Capital Market

Moreover, mainland China's capital market has gained global appeal, partly due to the inclusion of A-shares and government bonds in major global indices. Since the MSCI index added A-shares back in June 2018, the total value of mainland securities held by international investors has risen to nearly 7.6 trillion yuan—a significant increase of 4.7 trillion yuan over the past six years.

Stable Influence of Stock Connect Mechanisms

While capital markets in both regions have faced fluctuations, the Stock Connect mechanisms have provided a stabilizing influence, serving as a vital conduit for capital flow. This intrinsic connection further solidifies Hong Kong's status as a critical bridge between the mainland's capital markets and the global investment community.

Looking Ahead: Future of Stock Connect

As we celebrate this decade of interconnectivity, it becomes evident that the Stock Connect mechanism not only underscores the robustness of the relationship between the mainland and Hong Kong but also marks the latter as an essential investment destination for foreign investors keen on tapping into one of the world's most dynamic markets. Stay tuned as we delve deeper into how evolving strategies and regulations may shape the next decade of this pivotal financial partnership!