Scope of eligible stocks under Stock Connect scheme expanded

Huang Yixuan
The Shanghai Stock Exchange has released its revised implementation measures for the Shanghai-Hong Kong Stock Connect business.
Huang Yixuan

The Shanghai Stock Exchange has released its revised implementation measures for the Shanghai-Hong Kong Stock Connect business, which will be officially put into effect on March 13.

After the revision, the scope of eligible stocks under the Stock Connect scheme will be significantly expanded. This will incorporate more stocks of listed companies on the SSE into the mutual market access program linking the Shanghai and Hong Kong markets, achieving a higher level of opening-up.

The benchmark index for shares under the Stock Connect are to be expanded from SSE 180 Index and SSE 380 Index to the SSE A-Share Index, and the coverage of constituent stocks will be further scaled up from only large- and mid-cap stocks to cover medium- and small-cap stocks listed on the Shanghai market.

Plus the number of stocks that can be selected from each industry will no longer be limited, which will lead to a large increase in the total number of constituent stocks.

Meanwhile, based on the principle of risk control, new requirements are set for shares to be included. Eligible stocks should post an average daily market value of over 5 billion yuan, an average daily turnover of 30 million yuan at least, and the number of days of trading suspension accounting for less than 50 percent.

Another change in the revision is that it set up a buffer mechanism for adjustments, with the criteria for excluding shares set lower than the requirements for shares to be included. This is to reduce the frequent inclusion and deletion of stocks under the Stock Connect.

Specifically, in semi-annual regular adjustments, a non-A+H stock will be removed from the program if the average daily market value falls to 4 billion yuan, or its average daily turnover is less than 20 million yuan, or the number of full days of trading suspension account for more than 50 percent.

The first-time inclusion arrangements for stocks of companies with different voting rights structure under the Shanghai Stock Connect have also been clarified in accordance with such arrangements under the Hong Kong Stock Connect programs.

The Shenzhen bourse also revised its measures on the Stock Connect linking Shenzhen and Hong Kong.

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