Shenzhen-HK stock connect reflects liberalizing capital

Financial analysts in Hong Kong reckon that the Shenzhen-Hong Kong Stock Connect, which will likely be launched in December, will facilitate larger and more balanced cross-border renminbi fund flows.

The second equity trade link between the mainland and Hong Kong, announced in mid-August by the China Securities Regulatory Commission and Hong Kong's Securities and Futures Commission, would abolish an aggregate quota. The aggregate quota for the Shanghai-Hong Kong Stock Connect, launched in November 2014, was also scrapped.

"Against this backdrop of strong two-way equity market flows, the abolishment of overall quotas can be seen as an indication that the mainland's capital account liberalization is maturing and policymakers are becoming more comfortable with the nature of cross-border foreign exchange flows and the renminbi's outlook," said a research report on emerging market currencies from HSBC.