By Charles Li, chief executive of Hong Kong Exchanges and Clearing
The Shanghai-Hong Kong Stock Connect has now launched. More than a year of discussions and months of intensive market preparations culminated in the opening gong on Monday morning, and the flow o funds directly between the Hong Kong and Shanghai markets for the very first time.
People on both sides of the boundary are excited about the launch, and are eager to see how much is invested northbound and southbound, how quickly quotas are used up, if international investors can get used to pre-trade checking requirements, and more.
The newspapers and media reports are awash with predictions from market analysts. Some expect there to be substantially more funds flowing north to Shanghai, while others predict Mainland investors will flood Hong Kong's market. Some think the quota is too small and will be used up quickly, while others might think initial trading will be light. With such a wide spectrum of predictions, some people will be right and some will be wrong.
The most important thing for us is to get this historic "train" on the tracks and to depart the station safely. Indeed, whether the initial trains are sold out with large crowds left on the platform or the train departs with some empty seats may not be as important. What matters to us is that this is a long term scheme and its success will be measured in years, not days or weeks. The immediate achievement is the infrastructure itself, which connects such vastly different and disparate markets and systems.
I've also heard a lot of people speculate over who gains more from the scheme; some think the Mainland is the major beneficiary because its market is opening and its currency is becoming more international. Others say it's a gift to Hong Kong that will enhance liquidity and bring more investors to our market. I think both of these perspectives miss the point – the question we should be asking is, are we better off with Shanghai-Hong Kong Stock Connect or without it? The answer is easy. Instead of counting marbles to see which side has more, we should be confident that we found a solution that benefits both sides.
The regulators, exchanges, and clearing houses on both sides of the boundary have worked extremely hard over the last seven months to iron out as many kinks in the scheme as possible prior to launch day. Just this week, the HKMA announced that the RMB20,000 daily exchange limit would be lifted, and yesterday the capital gains tax issues were settled. This should give investors some certainty and confidence.
Still, there may be hiccups in the early going. Our team has worked hard and is prepared for a number of situations, but as with any scheme of this magnitude, there is always the possibility of something unanticipated cropping up. If this happens, we will work to fix the issues as best as we can. Shanghai-Hong Kong Stock Connect will keep evolving and getting better over time, so we shouldn't be too elated if everything is great on the first day, or too disappointed if it doesn't meet our expectations. It is a long road, and we are just getting started.
I want to sincerely thank everyone in the market for your support. It hasn't been easy coming this far, but we're ready to launch. Best of luck to you all. This is a journey we'll be on together for a long time.