China’s market regulator launches 5 measures to help rescue Hong Kong’s battered stock market

China’s capital market regulators have announced a package of measures to boost liquidity, attract international investors and enhance competitiveness between the mainland and Hong Kong, offering a salve to the city’s market woes.

The China Securities Regulatory Commission (CSRC) announced on Friday it would “deepen” its cooperation with Hong Kong through five new measures which aim to optimise the city’s status as an international financial centre.

The aim is to promote the coordinated development of the capital markets of the mainland and Hong Kong.

The measures include plans to relax the eligibility criteria for exchange-traded fund (ETF) products in the Stock Connect mechanism that links the two financial hubs. The watchdog also aims to loosen the listing rules for Chinese companies wanting to launch initial public offerings (IPO) in Hong Kong.

The CSRC said it would enhance its communication and coordination with the relevant departments to support qualified mainland industry leaders wishing to go public in Hong Kong.

Other measures include allowing qualified real estate investment trusts (REITs) from the mainland and Hong Kong access to the Shanghai-Shenzhen-Hong Kong Stock Connect channel, and including yuan-denominated stock trading counters on the Hong Kong stock side of the cross-border mechanism.

The moves come amid the worst listing market Hong Kong has seen since 2009. In the first quarter, the city saw 12 IPOs, raising US$604.4 million, a decrease of 29 per cent year on year.

Earlier in the week, Xia Baolong, Beijing’s top man on Hong Kong affairs, said the city offered several unique advantages such as its rule of law, competitiveness and innovation.

He said new policies would continue to come to support the city’s ongoing development and “maximise the dividends of one country, two system”.

“The measures announced today are important initiatives to support the further development of Hong Kong’s financial markets, increase the number of attractive investment products, provide more investment opportunities to domestic, mainland and overseas investors, and enhance Hong Kong’s status as an offshore [yuan] business centre,” said the city’s Chief Executive, John Lee Ka-chiu.

The expansion of mutual access between the financial markets of the mainland and Hong Kong “encapsulates our country’s firm support for Hong Kong to enhance its status as an international financial centre,” he added.

The measures will allow the city to better perform its function as a platform for attracting capital and high-quality enterprises, said financial secretary Paul Chan Mo-po.

“Support for leading mainland enterprises of industries to list in Hong Kong will benefit Hong Kong’s initial public offering market,” he said. “The increase of listed companies with long-term growth and return potential in Hong Kong will also drive the development of our secondary market.”

Among the measures, the CSRC plans to reduce the average asset management size requirements for ETFs to trade via Stock Connect.

The measures will bring more choice to international and mainland investors, attract more liquidity to the city’s markets and further enhance the competitiveness of Hong Kong, said Bonnie Chan Yi-ting, the CEO of Hong Kong Exchanges and Clearing (HKEX), the bourse operator.

“We warmly welcome the initiatives announced today by the China Securities Regulatory Commission that support the continued development of Hong Kong’s capital markets,” said Chan.

“We look forward to continue working closely with our mainland partners and regulators to prepare for the launch of these initiatives,” said Chan.

Another measure involves optimising the mutual recognition arrangement of funds so as to help meet the diversified investment needs of investors in the mainland and Hong Kong.

“We are delighted that the joint efforts of the two securities regulators are now bearing fruit, with several mutual market access schemes seeing significant breakthroughs,” said Julia Leung, chief executive officer of Hong Kong’s Securities and Futures Commission (SFC).

“We believe the expansion of the Stock Connect and the enhancements of the mutual recognition of funds will enrich product choice for mainland and international investors.”

She added the schemes will enable Hong Kong to better leverage its unique role and advantages in the “high-quality opening-up” of mainland China’s capital market.

The new measures will be a big boost for the Hong Kong IPO market, according to Robert Lee Wai-wang, lawmaker for Hong Kong’s financial services sector and a local broker.

“The new measures indicate the central government will support the key players of important industry to list in Hong Kong, which will support the IPO market in Hong Kong and will strengthen the city’s role as a fund raising centre for Chinese companies,” said Lee.

“The new measures may mean Hong Kong can reboot its new listings as soon as the second half of this year.

“Overall, they will strengthen Hong Kong as an international financial centre of Hong Kong.”

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