The head of Hong Kong’s Securities and Futures Commission (SFC), Tim Lui, has proposed significant adjustments to the Stock Connect program to increase stock market turnover and enhance investor sentiment. At the National People’s Congress (NPC) in Beijing, Lui suggested reducing the minimum asset requirement for mainland Chinese traders participating in the southbound leg of the Stock Connect from 500,000 yuan (US$13,900) to 100,000 yuan.
Lui, representing Hong Kong as one of the 36 delegates, highlighted this proposal during the annual parliamentary meeting, emphasizing its potential to invigorate Hong Kong’s US$4.8 trillion stock market. This market is notable for the presence of major Chinese tech giants like Alibaba Group Holding and Tencent Holdings, which dominate trading volumes.
Since its inception in 2014, the Stock Connect program has significantly increased the participation of mainland investors in Hong Kong’s market. These investors accounted for about 30% of the daily turnover last year, a substantial increase from just 3% in 2015. Lui’s proposal aims to further boost the valuation of overseas-listed companies and solidify Hong Kong’s position as the third-largest stock market in Asia, especially as it faces growing competition from emerging markets like India.
Additionally, Lui recommended that the mainland’s market regulator expedite the registration process for Chinese companies wishing to list in Hong Kong and support the city in introducing more derivative products linked to yuan assets. This move would strengthen financial ties and enhance the region’s appeal to investors.
In efforts to make the Hong Kong market more attractive to mainland investors, Lui also proposed that China reduce the 20% dividend tax to zero for those who hold stocks for at least a year, aligning it with mainland practices.
Further enhancing cross-border financial services, Lui advocated for the expansion of the Wealth Management Connect scheme, which allows investors from Hong Kong and the mainland to access each other’s investment products. He suggested enabling cross-border investment consulting services and mutual recognition of securities and futures business licenses.
Another of Lui’s submissions to the NPC included a proposal to issue Qualified Domestic Institutional Investor (QDII) funds that invest in stocks, bonds, and exchange-traded funds traded in Hong Kong and are linked to China’s Belt and Road Initiative. He recommended an initial quota of 500 billion yuan for these funds, which would attract more financial activity from Belt and Road countries and promote the capital market’s prosperity in Hong Kong.
These proposed measures by Lui are designed to attract more investment, stimulate market activity, and ensure the long-term viability of Hong Kong’s financial market amid regional competition and global financial shifts.
