Shenzhen-Hong Kong Trading Link Set to Start by Year-End

China is set to launch a trading link between Shenzhen and Hong Kong by year-end, marking authorities' latest effort to open up the mainland's financial markets to global investors.

Stocks in Hong Kong surged, with Hong Kong Exchanges & Clearing Ltd., the city's exchange operator, up 8.7%, compared with a 3.1% rise in the benchmark Hang Seng Index. Mainland brokerages with listings in Hong Kong made the sharpest gains, with Shenwan Hongyuan (H.K.) Ltd. up 16%.

"This year we will unveil the Shenzhen-Hong Kong Stock Connect, which shows China's capital market has opened a new channel connecting to the world," wrote central bank Gov. Zhou Xiaochuan in an article published late Tuesday on its website.

The plan, which comes nearly a year after the launch of the much-anticipated Shanghai-Hong Kong Stock Connect, would allow foreign investors greater access to the mainland market. Currently, only select fund managers with approval from Beijing are allowed to invest in Shenzhen, though all investors can access the bigger Shanghai Stock Exchange through the Hong Kong link.

The Hong Kong Stock Connect had a lackluster start after its launch in November 2014. Volumes also have dwindled since the summer's market turmoil and Beijing's surprise devaluation of the yuan.

In March, China's Prime Minister Li Keqiang said the Shenzhen link would launch at "an appropriate time," but didn't set a time frame for launch.

The chairman of Hong Kong Exchange and Clearing, Charles Li said in August the technical preparations for the Shenzhen-Hong Kong Stock Connect had been completed.

The announcement also marks the latest in a raft of measures to open up China's financial markets as the world's second largest economy seeks to increase its global stature.

On Monday, HSBC Holdings PLC said it would establish a majority-owned securities joint venture in Shenzhen's free trade zone, as China starts easing restrictions on foreign securities firms operating in its tightly controlled capital market.

Global investors sold a net 4.48 billion yuan ($706.9 million) of Chinese stocks during October, the second month of net outflows since launch after an investor exodus in July. Turnover through Stock Connect has declined on a month-on-month basis every month since June, according to data from HKEx.

In China, the Shenzhen Composite jumped 3.3%, while the ChiNext Price Index, composed largely of growth stocks and occasionally referred to as China's Nasdaq, rose 4.4%.

Chinese brokerages jumped too, with Citic Securities Co. up 9%, GF Securities Co. gaining 5.9% and Haitong Securities Co. rising 8.5%.

Shenzhen-listed companies with Hong Kong listings also rose, with Shandong Molong Petroleum Machinery Co., which sells drilling parts to China's oil companies, gaining 16.4%, and Zhejiang Shibao Co. a maker of automotive steering parts, surging 15%.

Yifan Xie contributed to this article.

Write to Gregor Stuart Hunter at [e-mail]

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(END) Dow Jones Newswires

November 04, 2015 00:15 ET (05:15 GMT)

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