Stock Connect

Definition

Stock Connect refers to the mechanism through the Shanghai Stock Exchange and Shenzhen Stock Exchange, allowing foreign investors to trade stocks listed in Shanghai and Shenzhen via the Hong Kong Stock Exchange. The launch of Stock Connect provides foreign investors with a more convenient channel to invest in the mainland stock market.

Origin

The concept of Stock Connect originated from the process of opening China's capital markets to the outside world. In November 2014, the Shanghai-Hong Kong Stock Connect was officially launched, marking the birth of Stock Connect. Later, in December 2016, the Shenzhen-Hong Kong Stock Connect was also launched, further expanding the coverage of Stock Connect.

Categories and Features

Stock Connect is mainly divided into Shanghai Connect and Shenzhen Connect. Shanghai Connect refers to trading stocks listed on the Shanghai Stock Exchange through the Hong Kong Stock Exchange, while Shenzhen Connect refers to trading stocks listed on the Shenzhen Stock Exchange. Its features include: 1. Providing foreign investors access to the Chinese A-share market; 2. Trading times synchronized with the mainland market; 3. Limited investment scope, usually including large-cap stocks and some mid-cap stocks.

Case Studies

Case 1: After the launch of the Shanghai-Hong Kong Stock Connect in 2014, foreign investors bought a significant amount of Bank of China's shares through Stock Connect, promoting the internationalization of the stock. Case 2: After the launch of the Shenzhen-Hong Kong Stock Connect in 2016, Tencent Holdings became a popular target for foreign investors through Stock Connect, highlighting the appeal of tech stocks.

Common Issues

Common issues for investors include: 1. How do quota limits of Stock Connect affect investments? Typically, Stock Connect has daily quota limits, which may prevent investors from buying or selling promptly in certain situations. 2. How to choose suitable investment targets? It is recommended that investors focus on the fundamentals of the target company and market trends.