China to trial 'stock connect' between Shenzhen and Hong Kong

[BEIJING] China will link up the Shenzhen and Hong Kong stock exchanges on a trial basis as part of its financial sector reform, the government said Thursday.

The move follows a similar scheme between the Shanghai and Hong Kong bourses launched in November, which officials trumpeted as opening up China's closeted stock markets to the outside world.

The Shenzhen programme will be launched "at an appropriate time", according to Premier Li Keqiang's "work report" to be submitted to the annual session of the National People's Congress, China's communist-controlled legislature.

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, and has generated only tepid interest with foreign buyers according to media reports.

The arrangement gives foreign investors access to China's foremost private companies in technology and health care industries through the arrangement, previous media reports said.

But so far only a little over one third of the quota allocated for foreign purchases in Shanghai has been taken up, exchange websites show. In the other direction, Chinese investors have only bought about 10 per cent of the amount they are allowed to in Hong Kong under the scheme.

AFP