Joint trading sought for HK and Shanghai By Geoff Dyer in Shanghai
Thu Feb 15, 5:10 PM ET
Mainland China and Hong Kong should establish a joint trading mechanism for the shares of companies listed in both markets to help prevent stockmarket bubbles in China and to modernise its financial system, a leading Shanghai official said on Thursday.
The mooted trading system would allow investors in Shanghai and Hong Kong to buy and sell shares in both markets in the 38 companies with dual listings, which include many of the leading names in corporate China.
Although the idea is only a proposal, if implemented it would represent a landmark exercise in linking the Chinese financial system to Hong Kong and to global financial markets. The two markets of Shanghai and Hong Kong have largely operated independently.
Fang Xinghai, deputy director of the Shanghai government's Financial Services office, told the FT such a mechanism would mean share prices in Shanghai would reflect international as well as domestic investor sentiment. It would also put pressure on the mainland market to improve its corporate governance standards.
"China can better utilise Hong Kong's more advanced financial market as an asset. It could help to modernise the entire Chinese financial system," he said. A former deputy head of the Shanghai stock exchange, Mr Fang is the Shanghai official charged with developing the city as a financial centre.
Mr Fang said the new trading mechanism between the two markets would require special custodian arrangements that would allow investors to open trading accounts in both markets.
Although China still has capital controls, he said there were existing mechanisms for foreign investors to buy mainland shares and for domestic funds to go overseas, which could be used to operate the trading on both exchanges.
In an online column earlier this month, Joseph Yam, the head of the Hong Kong Monetary Authority, the territory's de facto central bank, raised the prospect of creating a channel that would link Hong Kong with the mainland market. |
