2020 launch for Shanghai-Deutsche Stock Connect

Preparations for a Shanghai-Deutsche Stock Connect program is well under way.

The new scheme linking the Shanghai and Frankfurt stock exchanges will be launched in 2020 with the China Europe International Exchange (CEINEX) currently in charge of its establishment.

The scheme will promote German listed blue-chip companies to issue Chinese depositary receipts on the Shanghai Stock Exchange, and support certain qualified Chinese listed companies, especially those in the manufacturing sector, to issue global depositary receipts on the Frankfurt bourse in order to strengthen the interconnection between Chinese and German stock markets, according to CEINEX.

"In the next step, through the issuance of depository receipts, CEINEX will make efforts to build closer links between the capital markets and the real economy in China and Germany," Chen Han, Co-Chief Executive Officer of CEINEX.

The CEINEX is a joint venture established in 2015 by the Shanghai Stock Exchange, Deutsche Börse Group, and China Financial Futures Exchange. It is the first dedicated trading venue for investment products related to China and the yuan outside the Chinese mainland.

The stock connect program, which first launched five years ago with a pilot project linking Shanghai with Hong Kong, has been a success in China's progress in opening up the mainland's equity market to overseas capital.

The program has led to sustained growth in two-way capital flow, as it enabled offshore capital to invest in the mainland market and also give a way for Chinese investors to reach overseas markets.

Data showed that by the end of October, the total cumulative northbound (to the mainland) trading turnover on stock connect was 17.41 trillion yuan (about US$2.48 trillion), bringing net capital inflows of 860 billion yuan into the A-share market.

Meanwhile, total cumulative southbound (to Hong Kong) trading turnover reached HK$8.75 trillion (about US$1.12 trillion) over the past five years, bringing net capital inflows of HK$987 billion into the Hong Kong market, according to Hong Kong Exchanges and Clearing.