Investors welcome tests next week for Shenzhen-HK trading link

Premier Li Keqiang said in March that the central government will seek to launch the Shenzhen-Hong Kong Stock Connect this year.[Photo/IC]

There were mounting hopes on Thursday among investors that the Shenzhen-Hong Kong Stock Connect－the long-awaited equities trading link between the Shenzhen and Hong Kong bourses－which could give a hefty boost to tepid cross-border stock markets－will launch very soon.

Hong Kong and mainland stock investors were buoyed by the announcement that the Hong Kong Stock Exchange is holding a system-wide test run on Monday for stock links with Shenzhen.

A circular published on the bourse's website on Tuesday said the market tests would allow brokers in Hong Kong to get ready for the launch of the new "through train", reignited hopes of investors who have been anxiously awaiting its arrival for nearly one and a half years.

Chinese mainland stock markets have been grappling with the lack of a positive catalyst to jump-start sentiment in the aftermath of last summer's stock market rout.

Hong Kong stocks, likewise, floundered for quite a while amid lackluster investor appetite.

The first half of the year saw uncertainty amid growing worries about the direction of US interest rates, the rejection of mainland A shares in the MSCI benchmark indexes, as well as Britain's possible departure from the European Union.

Cautious investors sat on the sidelines, clamoring for a bright spot to revive the markets in the second half.

This is where the second stock connect between the mainland and Hong Kong, in the wake of the one linking the Shanghai market, could come in, said Linus Yip Sheung-chi, chief strategist at First Shanghai Securities in Hong Kong.

Anthony Ho, deputy chief executive officer at Amundi Asset Management in Hong Kong, said he believed the upcoming connect scheme would pump liquidity into the cross-border equity markets and serve as a steppingstone for the further opening up of the capital markets on the Chinese mainland.

Some analysts, however, said they viewed the new stock trading link as part of an older story. They said its official launch was now a matter of time, and they predicted that market reactions would be rather muted, at least in the short run.

"The Shenzhen-Hong Kong Stock Connect is a totally different universe from the first such scheme launched back in November 2014, linking Hong Kong Stock Exchange and the Shanghai Stock Exchange," said Ho.