Mainland China Briefing: SEHK, SSE And SZSE Announce Stock Connect Expansion Arrangements.

Legal News & Analysis - Asia Pacific - China - Investment Funds - Capital Markets

26 January 2021

On 27 November 2020, The Stock Exchange of Hong Kong Limited (SEHK), the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) agreed to expand the scope of eligible stocks traded under the Shenzhen-Hong Kong Stock Connect and the Shanghai-Hong Kong Stock Connect (collectively, Stock Connects) to include eligible A-shares listed on the SSE’s Sci-Tech Innovation Board (Star Market) as well as eligible pre-revenue biotech companies listed in Hong Kong.

The SEHK, SSE and SZSE had previously agreed on the Stock Connects inclusion arrangements for A+H companies listed on the STAR Market. Upon further discussions, it was agreed that STAR Market-listed shares that are constituent stocks of the SSE 180 Index and SSE 380 Index, or have H-share counterparts listed in Hong Kong, will be eligible for Northbound trading under the existing Shanghai-Hong Kong Stock Connect arrangements (accordingly, their corresponding H-shares will be included in Southbound trading of Stock Connect). Given the special investor eligibility requirements of the STAR Market, STAR Market-listed shares will only be accessible via Northbound trading of Stock Connect by institutional professional investors as defined under relevant Hong Kong rules. Further, the relevant rules for the arrangement are subject to regulatory approval in Hong Kong and Mainland China.

In relation to inclusion arrangements for pre-revenue biotech companies, the exchanges have agreed that shares of pre-revenue biotech companies listed under Chapter 18A of Hong Kong’s Main Board Listing Rules that are eligible constituent stocks of the Hang Seng Composite Index, or have corresponding A-shares listed on SSE or SZSE, will be included in Southbound trading of Stock Connect under the existing Stock Connects arrangements (shares of biotech companies that are H-shares in STAR Market-listed A+H companies will be included in Southbound trading of Stock Connect pursuant to the inclusion arrangements for STAR Market-listed shares mentioned above). For the avoidance of doubt, the inclusion of biotech shares in Hong Kong whose stock names do not end with the marker “B”, or those that are already eligible for Southbound trading at the time of the announcement, will not be affected by this arrangement.


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Taylor Hui, Partner, Deacons