Stock connect takes expansion route

Hong Kong and mainland exchanges are set to expand the stock connect scheme to allow mainland investors to trade shares of secondary listed companies and unprofitable biotech firms in the SAR.

Carrie Lam is expected to announce the plan in today's policy address after a meeting this month with Vice Premier Han Zheng, according to Sing Tao Daily, sister newspaper of The Standard.

Shares of Hong Kong Exchanges and Clearing rose 4.03 percent yesterday on investor optimism the expansion will drive up market turnover significantly.

Dual-listing shares also outperformed: e-commerce giant Alibaba climbed 2.27 percent, its competitor JD.com 1.04 percent and online game developer NetEase 1.55 percent.

Pang Ming, head of macro and strategic research at China Renaissance Securities, said the inclusion of dual-listed companies will help the Hong Kong stock exchange attract more new-economy companies and firms listed in foreign markets.

It would also lift turnover, the number of transactions and valuations of biotech firms and dual-listed companies.

Beijing revised rules to include SAR-listed companies under dual-class share structures like Xiaomi and Meituan in the stock connect in October.

Meanwhile, HKEX said it will introduce a new settlement acceleration platform - HKEX Synapse - for stock connect.

That should boost efficiency or foreign investors to invest in mainland markets by standardizing and streamlining post-trade workflows of northbound stock connect.

It should also help institutional investors participate in the scheme to manage their post-trade operations across different time zones, in particular with regard to adhering to the mainland securities market's T+0 settlement cycle.

avery.chen@singtaonewscorp.com