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Hong Kong and Shenzhen mull stock exchange link-up

Hong Kong Exchanges & Clearing Ltd plans to expand links with China over the next three years, including starting a system for mainland investors to take part in the city's initial public offerings.

[HONG KONG] Hong Kong's bourse said on Wednesday it is seeking to boost trade with China's Shenzhen stock exchange, after the launch of the highly touted link-up with Shanghai last November.

Officials had trumpeted the Shanghai-Hong Kong Stock Connect as opening up China's closeted stock markets to the outside world, in a link which could lead to billions of dollars in daily cross-border transactions.

But, the plan has not generated much interest with foreign buyers, who have used only 25 per cent of their quota for mainland stocks and less than 6 per cent for Hong Kong shares, according to Bloomberg News.

But this has not put off bourse authorities in Hong Kong and the neighbouring Chinese city of Shenzhen from studying the possibility of a new stock connect between the two major economic hubs.

Foreign investors would have access to China's foremost private companies in technology and health care industries through the touted trading link with the Shenzhen exchange, Bloomberg News reported.

"The Hong Kong stock exchange and Shenzhen Stock Exchange are conducting a feasibility study on a programme to connect the two markets," a spokesman for the Hong Kong's bourse told AFP Wednesday.

"When the plan matures, we will put the plan forward for regulatory approvals in both places," the Shenzhen Stock Exchange said Tuesday on its Weibo account, China's equivalent to Twitter.

The statement by the mainland bourse came after Chinese premier Li Keqiang said a stock connect between the former British colony and its neighbouring mainland city should be next, according to Chinese media.

The possible link-up would be "a further step for China's market to be globalised," Zheshang Securities Co strategist, Wang Weijun, told Bloomberg News.

The creation of the trading platform between Hong Kong and Shanghai was seen as a key step towards greater liberalisation in the world's second largest economy.

But it is subject to strict limits in order to preserve capital controls in China, where Communist authorities keep a tight grip on the yuan currency.