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Stock Connect gets approval

November 10, 2014

A trading link between Hong Kong and Shanghai's stock exchanges has eventually been given the green light by regulators after a delay last month. The project is key to Chinese market liberalization.

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Hong Kong Stock Exchange (Photo: EPA/YM YIK)
Image: picture-alliance/dpa

Following weeks of postponement over taxation details, the trade link between the stock exchanges of Hong Kong and Shanghai will launch on November 17, officials from sides confirmed Monday.

The Hong Kong Monetary Authority described the Stock Connect project as being pivotal for China's efforts to liberalize its financial market, saying it was "a milestone" towards achieving just that.

The platform will allow international investors to trade selected stocks on Shanghai's tightly restricted exchange and let mainland investors buy shares in Hong Kong. The scheme is believed to result in cross-border trades of up to $3.8 billion (3 billion euros) per day.

Limited progress, but progress

The venture is expected to see trade volumes rising on both sides, but it's still subject to strict limits so as to preserve capital controls in China, where authorities keep a tight grip on the yuan currency.

"Despite the limited degree of opening-up, it still means a great deal to the domestic capital markets and the whole financial system," BOC International analyst Shen Jun said in a statement.

Before the launch of Stock Connect next Monday, Chinese authorities will announce detailed policies to clarify capital gains tax issues and other technical parameters for trading.

hg/sgb (AFP, dpa)