There's no limit for connect schemes, says bourse chief

Themis Qi

The connect schemes are "limitless in the future" as the Hong Kong Exchanges and Clearing will continue to strive to include various financial products in the trading channels linked with mainland markets, chairman Carlson Tong Ka-shing said on the 10th anniversary of the innovative mechanism.

Launched in November 2014, the connect schemes have been significantly expanded, from only one stock channel between Shanghai and Hong Kong to various products, including exchange-traded funds, wealth management and bonds.

As of September, the channels connecting Hong Kong with Shanghai and Shenzhen recorded 177 trillion yuan (HK$190.53 trillion) in trading volume, 147 times more than a decade ago.

Tong said the mechanism has been an "irreplaceable" bridge and financial infrastructure between mainland and overseas markets, which supports Hong Kong as an international financial center.

Looking into the next decade, Tong expects the connect schemes to further widen, adding that he sees "no limitation" in their types of products. He said the current priority is to incorporate more hedging tools into the mechanism to develop Hong Kong into a cross-border risk-management hub, which is expected to enable overseas investors to hedge their investments in the mainland and vice versa.

Besides Swap Connect, HKEX is exploring more risk-hedging options, including China Treasury bill futures, for which Tong said Hong Kong has gained approval from Beijing.

Tong also said an IPO Connect is definitely on the to-do list of HKEX, but some targets need to be completed.

Tong referred to the inclusion of more ETFs, the dual counter of the HK dollar and Chinese yuan and a new connect scheme for real estate investment trusts - which are three out of five measures announced in April by the China Securities Regulatory Commission to deepen the cooperation with Hong Kong's capital market.

"We must make sure the products succeed. Otherwise, they won't be able to attract investors," Tong said.

Overseas expansion remains in Tong's plans, with Southeast Asia and the Middle East as two major target markets. When building partnerships with Saudi Arabia, Tong said it is important to show that Hong Kong is not "asking for money" but, instead, that the two regions are investing in each other.

As the Hong Kong market is struggling again due to the reelection of former US president Donald Trump, Tong said Hong Kong "can only do what it can do," including diversify the city's investment base as much as possible.

Tong, who worked in the capital market for over 30 years before chairing HKEX in May, said he will continue to leverage his experience to connect various stakeholders as the connect schemes do.

"I am confident that the connect schemes and the Hong Kong market will continue to prosper and hit new record highs," Tong said.

themis.qi@singtaonewscorp.com