Stock Connect to make bourses healthy

Securities | Oliver Barron

China is expected to launch Hong Kong-Shanghai Stock Connect, a scheme that will bring the Hong Kong and Shanghai stock exchanges together and allow mutual investment. With significant doubts hanging over the scheme since the outset, the fact that authorities are sticking to a timetable many believed to be unachievable shows that policymakers are serious about reforming the world's second-largest economy.

Under the scheme, mainland investors will be allowed to invest up to 250 billion yuan ($41 billion) in 268 Hong Kong stocks, while Hong Kong investors will be able to invest up to 300 billion yuan in 568 domestic equities. Investment into Shanghai from Hong Kong will be capped at 13 billion yuan a day, and investment in the other direction will be capped at 10.5 billion yuan a day. It is the first time that domestic individuals will be allowed to invest overseas.