Understand Stock Connect
Hong Kong investors cannot directly trade in individual Mainland stocks in the past, but can only capture the investment opportunities via funds and ETFs under certain specified investment programmes such as Qualified Foreign Institutional Investors (QFII) and RMB Qualified Foreign Institutional Investors (RQFII).
Starting from 2014, the Mainland and Hong Kong regulators made a concerted effort to create the cross-boundary stock trading link, and launched the Shanghai Connect in the late 2014 and Shenzhen Connect two years later. It opens a gateway for investors of their respective market to trade in stocks of others' market. Hong Kong and overseas investors can buy and sell a specified range of Shanghai and Shenzhen A-shares through the local brokerage firm participating in Stock Connect. Below are the main features of Stock Connect.
Starting from 28 October 2019, companies with WVR (weight voting rights) structures listed in Hong Kong will be deemed eligible for southbound trading, provided they already meet the eligibility requirements for southbound trading and other additional requirements on time of listing, market capitalisation, total turnover and compliance.
According to the "home market principle", trading via Stock Connect has to observe the trading rules and arrangement of others' market. Therefore, Hong Kong investors need to fully understand the trading rules and arrangement of the Mainland stock market for carrying out any northbound trades of A-shares.
The Mainland and Hong Kong regulators will enhance cross-boundary regulatory and enforcement cooperation in the interest of investor protection. Scopes of cooperation include referral and information exchange mechanisms concerning improper activities, investigatory cooperation in relation to cross-boundary illegal activities including disclosure of false or misleading information, insider dealing and market manipulation, bilateral enforcement exchange and training as well as enhancement of general standards of cross-boundary enforcement cooperation.
Investors can contact China Securities Regulatory Commission (CSRC) for any complaints in respect to the Mainland stock market.
Investors can contact the Securities and Futures Commission (SFC) for any complaints in respect to the Hong Kong securities and futures markets or SFC-licensed intermediaries. The Mainland and Hong Kong investors can also file their complaints to the respective regulator. The regulators will follow up according to their complaint handling process.
Since 1 January 2020, the Investor Compensation Fund has extended its coverage to the Shanghai and Shenzhen A-shares traded under the Stock Connect (Northbound trades of A-shares). However, the fund does not cover southbound trading of Stock Connect.