China in Transition

The Stock Connect

Goldman Sachs

A major change is underway in the structure of the Chinese stock market - and by extension the global stock market.

The “Stock Connect” link between China’s mainland markets and the Hong Kong Stock Exchange relaxes restrictions that historically split the Chinese stock market between shares targeted at local investors and those available to international investors.

The link was first launched in November 2014 between the Shanghai and Hong Kong exchanges and was extended in late 2016 to encompass the Shenzhen market. It allows mainland Chinese investors to purchase select Hong Kong and Chinese companies listed in Hong Kong, and lets foreigners buy China A shares listed on the mainland in a less restrictive manner than previously.

The Stock Connect programs create a single ‘China’ stock market that ranks as one of the biggest in the world by market cap and daily trading turnover. For international investors, the programs add more than 1,400 companies to the investable universe. These moves help diversify the portfolios of Chinese investors, increase efficiencies for trading in Chinese companies that are dual-listed, and increase the likelihood of Chinese shares being included in global benchmark stock indexes.

For more on Stock Connect and what it means for investors inside and outside China, see our infographic and report from Goldman Sachs Research.

READ THE REPORT: SH-HK Connect: New regime, unprecedented opportunity, 11 September 2014 

December 2016