Hong Kong and Shanghai Stock Market to be Linked to Boost Offshore Yuan Usage
By linking the Hong Kong and Shanghai stock markets will give offshore usage of the yuan the much needed boost. According to Hong Kong bourse chief who stated that the connection will be a milestone in the opening up of the financial market in China. This will attract a broader international and institutional investor base into China and will also allow Chinese investors to diversify their portfolios.
Just earlier this month the China Securities Regulatory Commission announced that it was starting a pilot program for cross market stock trades for mainland and Hong Kong investors in a plan to liberalize capital flows. The link between the two stock markets will solidify Hong Kong’s status in becoming the gateway of China in going global and for international investors to gain access to the country. This will further enhance the position of Hong Kong in becoming the primary offshore RMB center and will broaden the Chinese investor base.
Large amounts of trading will be don e using the RMB, and using Hong Kong’s offshore RMB business will allow it to go beyond trading in goods and bank deposits and investment activities will hopefully increase the circulation of offshore yuan. The program will be known as the Shanghai-Hong Kong Stock Connect and will allow Hong Kong and mainland investors in trading stocks that is listed in either bourse.