FINA4320A
China Equity Securities Market
（中國權益證券市場）
First Term 2022-2023
LAU Kwan Ho
Discussion
before
the Class
How to trade?
Reminiscences of a Stock Operator by Edwin Lefèvre
(股票作手回忆录)
https://www.amazon.com/Reminiscences-Operator-Esse
ntial-Investment-Classics-ebook/dp/B07XDLW6C9/
How to Trade In Stocks by Jesse L. Livermore
(股票作手操盘术)
http://www.amazon.com/How-Trade-Stocks-Jesse-Liver
more-ebook/dp/B0062Y79M0
Discussion
before
the Class
What are the regulatory efforts made in
improving quality of listed companies?
国务院关于进一步提高上市公司质量的意见
2020.10.09 (Optional Reading)
http://www.gov.cn/zhengce/content/2020-10/09/conten
t_5549924.htm
提高央企控股上市公司质量工作方案
2022.05.27 (Optional Reading)
http://www.gov.cn/xinwen/2022-05/27/content_569262
1.htm
Market infrastructure
Source:
chinaclear.cn
Life Cycle of a Trade
Securities depository and clearing institution
➔
A securities depository and clearing institution is a legally registered not-for-profit
legal person that provides centralized registration, depository and settlement
services for securities trading and is qualified as a legal person. (145)
➔
The registration and settlement of securities traded on stock exchanges and other
national stock trading places approved by the State Council shall adopt a centralized
and unified operation mode nationwide. (148)
➔
证券登记结算机构为证券交易提供集中登记、存管与结算服务，不以营利为
目的，依法登记，取得法人资格。 (145)
➔
在证券交易所和国务院批准的其他全国性证券交易场所交易的证券的登记
结算，应当采取全国集中统一的运营方式。 (148)
China Securities Depository and Clearing
Corporation Limited (CSDC/中证登)
➔
(1) Opening of securities accounts and settlement accounts; (2) Custody and
transfer of securities; (3) Registration of roster of securities holders; (4) Clearing
and settlement of securities transactions; (5) Distribution of securities rights and
interests as entrusted by an issuer; (6) Provision of inquiry and information services
relating to the aforesaid businesses; (7) Other businesses as approved. (147)
➔
（一）证券账户、结算账户的设立；（二）证券的存管和过户；（三）证券持有人名册登记；
（四）证券交易的清算和交收；（五）受发行人的委托派发证券权益；（六）办理与上述业
务有关的查询、信息服务；（七）国务院证券监督管理机构批准的其他业务。(147)
China Securities Depository and Clearing
Corporation Limited (CSDC/中证登)
➔
A securities depository and clearing institution shall establish a securities
settlement risk fund so as to pay in advance or make up any loss of the
securities depository and clearing institution as incurred from default
delivery, technical failure, operation failure or force majeure. (154)
➔
证券登记结算机构应当设立证券结算风险基金，用于垫付或者弥补因违约
交收、技术故障、操作失误、不可抗力造成的证券登记结算机构的损失。
(154)
Settlement cycle
➔ A shares: T+1
➔ B shares: T+3
➔ All other securities: T+1
Information technology system
➔ Hundsun Electronics (恒生电子): focuses on the financial industry
and offers integrated solution and services to the institutions of
securities, futures, funds, trust, insurance, banking, exchange and
private placement
➔ HiThink Royal Flush Information Network (同花顺财经): provides
online financial data, data analysis software, and other financial
software system, with over 400 million active investors on platform
Stock indices
➔
➔
China Securities Index Company Limited (CSI)
◆
SHSZ 300 Index (沪深300指數)、CSI500 Smallcap Index (中证500指數)
◆
SSE Composite Index (上证指數)、SSE 180 Index (上证180指數)、
SSE 50 Index (上证50指數)、STAR 50 Index (科创50指數)
◆
BSE 50 Index (北证50指数)
Shenzhen Securities Information Company Limited (SSIC)
◆
➔
SZSE COMPONENT INDEX (深证成指)、SZSE 100 Index (深证100指數)、
SZSE SME 100 Index (深证中小企业 100 指数)、ChiNext Index (创业板指)
FTSE China A50、MSCI China A Onshore Index
Other securities service institutions
➔
➔
➔
➔
➔
➔
➔
Accounting firms
Law firms
Investment consulting
Asset appraisal
Credit rating agencies
Financial advisory
Financial news agencies
Market access & Stock-connect
Market access & Stock-connect
➔ QFI (QFII + RQFII)
➔ SH-HK Stock Connect
➔ SZ-HK Stock Connect
➔ QFLP (Qualified Foreign Limited Partnership)
QFI (Qualified Foreign Investor)
➔
The ‘Qualified Foreign Institutional Investor’ (QFII) scheme was
introduced in 2002 to provide qualified foreign institutional investors
access to trade on Mainland stock exchanges via issuance of USD quota.
➔
The RMB denominated ‘RMB Qualified Foreign Institutional Investor’
(RQFII) scheme was introduced in 2011. RQFII quota was initially provided
to Hong Kong and subsequently expanded to nineteen other jurisdictions.
QFI (Qualified Foreign Investor)
➔
Merger of QFII regime and RQFII regime effective from Nov 2020
(CSRC Decree No. 176 - Measures for the Administration of Domestic
Securities and Futures Investment by QFII and RQFII) → QFI
➔
Removal of the requirement for minimum period of operation and
minimum amount of assets under management
➔
Expanding Investment Scope to NEEQ market, private investment funds,
futures and options, bond repo, margin trading and securities lending,
IPO/rights offering/private placement
Stock-connect
➔ Shanghai/Shenzhen-Hong Kong Stock Connect (深/沪港通) is a
cross-boundary investment channel that connects the
Shanghai/Shenzhen Stock Exchange and the HKEx.
➔ Investors in each market are able to trade shares on the other
market using their local brokers and clearing houses.
➔ SH-HK Stock Connect launched on 17 November 2014.
➔ SZ-HK Stock Connect launched on 5 December 2016.
Stock-connect (Northbound): Eligible investors
➔ ChiNext Stocks of Shenzhen Stock Exchange (SZSE) and STAR
Market Stocks of Shanghai Stock Exchange (SSE) which may only
be traded by institutional professional investors
➔ Other Connect Securities may be traded by all Hong Kong and
overseas investors through Shanghai and Shenzhen Connect.
Stock-connect (Northbound): Eligible stocks
➔
Shanghai: all constituent stocks from time to time of the SSE 180 Index and SSE 380
Index; and all the SSE-listed A shares that are not included as constituent stocks of
the relevant indices but which have corresponding H shares listed in Hong Kong,
except for those not traded in RMB and included in the “risk alert board”. (ST/*ST)
➔
Shenzhen: all the constituent stocks of the SZSE Component Index and the SZSE
Small/Mid Cap Innovation Index which have a market cap of not less than RMB 6
billion, and all the SZSE listed A shares which have corresponding H shares listed on
SEHK, except for those not traded in RMB and included in the “risk alert board”.
(ST/*ST)
Stock-connect (Northbound): ETF
➔
Inclusion of Exchange Traded Funds (ETFs) in Stock Connect was effective from 4
July 2022.
➔
ETFs listed on SSE/SZSE that satisfy all of the following criteria at any regular
review (Jun & Dec) will be accepted as eligible ETFs:
1. The ETF must be traded in RMB and have a daily average AUM in the last six
months of no less than RMB 1.5 billion;
2. The ETF must be listed for no less than 6 months;
3. The benchmark index must be launched for no less than 1 year; (to be cont.)
Stock-connect (Northbound): ETF
4. The total weighting of SSE-listed and SZSE-listed A shares in b’mark index must not be
less than 90% and the total weighting of Stock Connect Northbound eligible constituents
in the b’mark index must not be less than 80%; and
5(a). For broad-based b’mark indices (an index whose constituent selection is not limited to
a specific industry or investment theme but reflects the performance of a certain market
or a certain size of stocks): A constituent stock must not be more than 30% of the index’s
weighting.
(b). For non-broad-based b’mark indices: The number of index constituent stocks must
not be less than 30; A constituent must not exceed 15% of the index’s weighting and the
total weighting of the top five constituents must not exceed 60%; and The constituent
stocks comprising no less than 90% of the index’s weighting must be the top 80% shares by
Average Daily Turnover ranking in the relevant stock exchange in the past 12 months.
Stock-connect (Northbound): Quota
➔
The Daily Quota limits the maximum net buy value of cross-boundary trades under
each of SH and SZ Connect each day. The Northbound Daily Quota is set at RMB 52
billion for each of SH Connect and SZ Connect
➔
Daily Quota Balance = Daily Quota – Buy Orders + Sell Trades + Adjustments
➔
Once the Daily Quota is hit, no further buy orders will be accepted for the remainder of
the day. SEHK will resume the Northbound buying service on the following trading day
➔
The Daily Quota is applied on a “net buy” basis. Based on that principle, investors are
always allowed to sell their cross-boundary securities regardless of the quota balance
Stock-connect (Northbound): Quota
➔ The Daily Quota will be reset every day. Unused Daily Quota will
NOT be carried over to next day’s Daily Quota.
➔ There is no Aggregate Quota for Shanghai and Shenzhen Connect
as the Aggregate Quota for Shanghai Connect was abolished since
16 August 2016 and none was introduced for Shenzhen Connect.
Stock-connect (Northbound)
➔
Investors will only be allowed to trade on the other market on days where
Hong Kong and Mainland markets are both open for trading, and banking
services are available in both Hong Kong and Mainland markets on the
corresponding settlement days.
➔
Margin trading, Stock borrowing/lending and short-selling are allowed via
special arrangement
➔
Investor ID system and Master Special Segregated Account (SPSA) services
➔
HKEX Synapse - integrated settlement acceleration platform
Foreign ownership restriction
➔ Single foreign investor’s shareholding in a listed company
(regardless of the channels through which shares in such listed
company are held, including through QFI and Stock-connect) is not
allowed to exceed 10% of the company’s total issued shares
➔ All foreign investors’ shareholding in the A shares of a listed
company is not allowed to exceed 30% of its total issued share.
QFLP (Qualified Foreign Limited Partnership)
➔
Foreign private equity (PE) / venture capital (VC) and other overseas
investors may use QFLP in the form of a limited partnership as a platform
to invest in China.
➔
QFLP was firstly introduced in 2010 in Shanghai and then consecutively
available in Beijing, Chongqing, Tianjin, Shenzhen, and thereafter more
cities or regions.
➔
Reference: K. Yuan et al., An overview of the QFLP pilot program and expectation, China: Baker &
McKenzie FenXun, 2022. (Optional Reading)
(https://insightplus.bakermckenzie.com/bm/financial-institutions_1/china-an-overview-of-the-qflp-pil
ot-program-and-expectation)
Channels for Mainland investors to invest offshore...
➔ QDII
➔ Stock-connect (Southbound)
➔ QDLP
➔ Future: New rules in Greater Bay Area?
Questions?
Thank you and see you in next meeting!