Shanghai-Hong Kong Stock Connect actually includes two parts: Shanghai-Stock Connect and South-Hong Kong Stock Connect:
Shanghai Stock Connect means that investors entrust Hong Kong brokers to buy and sell stocks listed on the Shanghai Stock Exchange through a securities trading service company established by the Hong Kong Stock Exchange.
Shanghai-Hong Kong Stock Connect
Southbound trading refers to investors entrusting mainland securities companies to buy and sell stocks listed on the Hong Kong Stock Exchange through the securities trading Service Company established by the Shanghai Stock Exchange.
The Shanghai-Hong Kong Stock Connect is an important part of the opening up of the Chinese market. It is conducive to strengthening the connection between the two markets and promoting the two-way opening of the two markets. The main promotion content:
- It is beneficial to expand the investment channels of investors in the two places and enhance market competitiveness;
- Conducive to consolidating the status of Shanghai and Hong Kong as the two financial centers and increasing the attractiveness of international investors;
- It is conducive to promoting the internationalization of the RMB and supporting the development of Hong Kong into an offshore RMB business center.
- Related policies
On November 14, 2014, the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission jointly issued the “Notice on Tax Policies Concerning the Pilot Interconnection Mechanism of Shanghai and Hong Kong Stock Market Transactions”, from November 17, 2014 to November 16, 2017 As of today, the personal income tax will be temporarily exempted for three years for the income from the transfer price difference obtained by individual mainland investors through the Shanghai-Hong Kong Stock Connect to invest in stocks listed on the Hong Kong Stock Exchange.
From November 17, 2014, the income from the transfer price difference obtained by Hong Kong market investors (including enterprises and individuals) investing in A shares listed on the Shanghai Stock Exchange will be temporarily exempt from income tax; From November 17, 2014, the income from the transfer price difference obtained by Hong Kong market investors (including enterprises and individuals) investing in A shares listed on the Shanghai Stock Exchange will be temporarily exempt from income tax; Investors in the Hong Kong market through Shanghai-Hong Kong Stock Connect trading, inheritance, and donation of A shares listed on the Shanghai Stock Exchange shall pay stamp duty on securities transactions in accordance with the current tax system in China; China investors who buy and sell, inherit, and donate stocks listed on the Stock Exchange through Shanghai-Hong Kong Stock Connect shall pay stamp duty in accordance with the current tax laws of the Hong Kong Special Administrative Region.
- Which investors can participate in Shanghai-Hong Kong Stock Connect & what stocks can investors buy?
At the initial stage of the pilot program, the Hong Kong Securities Regulatory Commission required that domestic investors participating in Southbound Trading should be limited to institutional investors and individual investors with a total balance of securities accounts and capital accounts of no less than RMB 500,000.
In practical operation, the securities company will assess the suitability of individual investors’ asset status, knowledge level, risk tolerance and integrity status in accordance with the requirements of the SSE Southbound Stock Connect investor suitability management, and approve participating in Southbound Connect investors and require investors to sign an entrustment agreement on the premise of signing a risk disclosure letter.
The scope of the stocks purchased in the Shanghai Stock Connect is the constituent stocks of the Shanghai Stock Exchange SSE 180 Index and SSE 380 Index, as well as the stocks of A+H shares listed on the Shanghai Stock Exchange.
The stocks of Southbound Trading include the constituent stocks of the Hong Kong Stock Exchange Hang Seng Composite Large-Cap Index and the Hang Seng Composite Mid-Cap Index, as well as the stocks of A+ H-share companies listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange.
- What is the investment quota for Shanghai-Hong Kong Stock Connect?
In the initial stage of the launch, the total amount of RMB cross-border investment quota was managed, and daily quotas were set for real-time monitoring. Among them, the total quota of Shanghai Stock Connect is 300 billion yuan, and the daily quota is 13 billion yuan; The total quota of Southbound Trading is RMB 250 billion, and the daily quota is RMB 10.5 billion.
- The characteristics of Shanghai-Hong Kong Stock Connect
(1).Fully learn from the international experience of market interconnection and adopt more mature order routing technology and cross-border settlement arrangements to provide investors with convenient and efficient securities trading services;
(2).The stocks in each other’s market that investors from the two places can trade through the Shanghai-Hong Kong Stock Connect are limited to the specified scope;
(3). Two-way RMB settlement is adopted for investors, that is, China investors buy and sell southbound stocks quoted in Hong Kong dollars and settle in RMB, and Hong Kong investors buy and sell southbound stocks in RMB for quotation and settlement.