China driving Shenzhen’s capital market reform

By Huang Ge Source:Global Times Published: 2019/10/10 22:13:40

Enhancing regional cooperation crucial for Hong Kong: experts

A view of Shenzhen. File photo: VCG 

As China gears up to advance reform of the capital market of Shenzhen, South China's Guangdong Province, the city will play an increasingly large role in connecting the country with the world markets while also enhancing neighboring Hong Kong's position as a global financial hub, experts said on Thursday.

The China Securities Regulatory Commission (CSRC) is implementing the country's plan to deepen the reform of Shenzhen's capital market in a comprehensive way, CSRC Chairman Yi Huiman said on Wednesday during his two-day visit to Shenzhen, Shenzhen Special Zone Daily reported Thursday.

The CSRC will focus on the needs of the pilot demonstration area's development and endeavor to pursue periodic achievements, Yi said, noting that the efforts aim to improve the quality and efficiency of the local capital market to serve the real economy.

On August 18, China unveiled a guideline that aims to forge Shenzhen into a pilot demonstration area of socialism featuring Chinese characteristics, with a vital focus on boosting local financial markets and driving connectivity among the financial markets of Shenzhen, Hong Kong and Macao.

Given its development advantages and policy support, Shenzhen will play an increasingly important role in exploring financial product connections and the internationalization of the yuan and become a significant point that connects China with global financial markets, experts said. 

Thanks to Shenzhen's position as a test field during China's 40 years of reform and opening-up, the city has accumulated "proper edges" for its capital market, Song Ding, a research fellow at the Shenzhen-based China Development Institute, told the Global Times on Thursday.

"The fast growth of start-ups created an innovative climate in the city. What matters is that many private companies based in Shenzhen such as Huawei and Tencent have injected active impetus into the local market," he said, noting that Shenzhen has formed the comprehensive financial industry since its securities, insurance and trust sectors lead growth in the country.

Apart from its advantages, more work remains to be done to further activate Shenzhen's capital market such as lowering costs for companies, adopting differentiated financial regulations and encouraging industrial innovation, said Yao Benzhi, chief investment officer of Shenzhen-based asset management firm Fortune Valley Capital Investment Group.

The CSRC will improve the corporate listing on the Growth Enterprise Market, enhance the refinancing and merger systems, advance IPO registration reform and further connect financial markets with Hong Kong and Macao, Wang Weizhong, Party chief of Shenzhen was quoted as saying in the report.

Increasing connectivity

The starting point of Shenzhen's capital market was relatively high as the city is close to Hong Kong, which attracts plenty of world capital, and it has been learning from experience, with technology and talent coming from its neighbor in recent years, experts noted.

The efforts to drive capital market reform such as registration-based IPO reforms in Shenzhen will help increase the attractiveness of the mainland market and it is likely that more companies will choose to get listed on the mainland, Alex Zhao, an employee of a Hong Kong-based investment bank boutique, told the Global Times on Thursday.

The liquidity of the Hong Kong market has been much weaker than that of the A-share markets, Zhao said, noting that "due to recent social unrest in Hong Kong, many companies are adopting a wait-and-see attitude."

She forecast there would be some recovery in the Hong Kong market later in October.

The market capitalization of the Shenzhen and Shanghai bourses stood at 43 trillion yuan ($6.04 trillion) in 2018 while that of Hong Kong was HK$29.9 trillion ($3.81 trillion).

The economic growth of Hong Kong is being affected by the current local social unrest, but a stable environment can guarantee it remains one of the leading global capital financing centers, Yao said, noting that "Hong Kong's global financial hub position will be enhanced through Shenzhen's deepening capital market reform."

Yao told the Global Times on Thursday that Shenzhen and Hong Kong are expected to pursue cooperation in increasing two-way capital flows under the country's grand blueprint for the development of the Guangdong-Hong Kong-Macao Greater Bay Area. 

In that way, it would facilitate mainland companies in going to global markets while foreign capital would more actively flow to the mainland via financing channels of Hong Kong, Yao said.

As of the end of July, 1,205 mainland companies had been listed in Hong Kong, accounting for 68 percent of the market's total capitalization, according to the Hong Kong Exchanges and Clearing.


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