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[HONG KONG] Hong Kong Exchanges & Clearing Ltd expects to expand an equity link with China and allow mainland investors access to initial public offerings of foreign companies, Chief Executive Officer Charles Li said.
Li told fund managers on Friday he wants to include IPOs in the Shanghai-Hong Kong Stock Connect, which started almost a year ago and doesn't yet allow mainland investors to access initial share sales.
"One day, we might be able to match" Chinese investors "with a truly genuine international product," Li said. "The biggest liquidity in China is still inside China."
Li's plan comes as German Chancellor Angela Merkel this week led an entourage to China, inking deals with Chinese partners including Shanghai Stock Exchange to offer trading in exchange-traded funds and bonds. Chinese and British officials in September said they'll study the feasibility of setting up a London-Shanghai stock trading link.
HKEx in November 2014 started the Stock Connect program with the Shanghai exchange, allowing investors to directly access the largest companies traded in both markets. Since then, officials have been reviewing plans to expand the link to the Shenzhen exchange. Li had estimated in March that Chinese investors held US$22 trillion of investable assets.
To attract more Chinese funds, Li said Friday he plans to have similar links for bonds, commodities and derivatives.
Chinese companies account for about 65 per cent of Hong Kong's total US$4.1 trillion of traded equity value, Li said. Only two companies based outside greater China have conducted initial public offerings in Hong Kong this year, raising a combined US$52.1 million, according to data compiled by Bloomberg.
"We really need to break from that and expand from that," Li said.
The benchmark Hang Seng Index fell 0.8 per cent to 22,640.04 on Friday, while HKEx shares slipped 0.3 per cent.