On November 17, 2015, at a ceremony in Hong Kong marking the first anniversary of the Shanghai-Hong Kong Stock Connect scheme, Hong Kong Exchanges and Clearing (HKEx) chief executive Charles Li Xiaojia confirmed that the Shenzhen-Hong Kong stock connect scheme will not be launched this year, as previously reported.

The stock market turmoil on the mainland in the middle of this year has led to the expected delay and neither HKEx or mainland officials have announced a launch date in 2016.

The Shenzhen-Hong Kong Stock Connect is a follow-up initiative to boost cross-border trading after the link was established last year between the Hong Kong and Shanghai exchanges (read our previous QuickStudy on China Through-Train Investment Scheme).

Meanwhile, the parallel stock link with Shanghai has not been generating as much transaction volume as expected.

The November 17, 2014 Shanghai-Hong Kong Stock Connect launch broke new ground by allowing international retail investors to trade on the mainland market via Hong Kong brokers, while also letting mainland investors with 500,000 yuan trade in Hong Kong stocks via mainland brokers. 

It is widely reported that the Shanghai-Hong Kong Stock Connect’s turnover has been disappointing. The Hong Kong Exchanges and Clearing Limited (HKEx) reports monthly statistics for northbound turnover (international investors trading Shanghai A shares via a Hong Kong broker) and southbound (mainland investors trading securities on the Stock Exchange of Hong Kong) as:

Click here to view table.

The average daily northbound turnover stands at HK$8.13 billion (6.7 billion yuan), representing 0.6 percent of Shanghai’s daily market turnover, with southbound turnover at HK$3.3 billion (2.7 billion yuan), less than one percent of local turnover.

It remains to be seen in the long run if the Stock Connect programs will represent a key step in China’s liberalization of its capital account. And, if additional enhancements announced by Charles Li to the existing Shanghai scheme, such as increasing quotas, expanding the range of stocks included and other rule changes, will be introduced at the same time as the Shenzhen link launch.