By Gregor Stuart Hunter
Hong Kong stocks surged on hopes that a trading link between Shenzhen and Hong Kong is set to launch by year-end, marking authorities' latest effort to open up the mainland's financial markets to global investors.
The moves come after the central bank published comments about the time frame for the launch late Tuesday. On Wednesday, however, the central bank said Gov. Zhou Xiaochuan's remarks originally were made on May 27.
Hong Kong Exchanges & Clearing Ltd., the city's exchange operator, said plans for the link still need regulators' approval and no deal has been made yet.
Stocks nevertheless gained before the midday break, with shares of HKex up 8.7%, compared with a 3.1% rise in the benchmark Hang Seng Index. Mainland brokerages with listings in Hong Kong made the sharpest gains, with Shenwan Hongyuan (H.K.) Ltd. up 16%.
The plan, if launched, would allow foreign investors greater access to the mainland market. It also comes nearly a year after the start of the much-anticipated Shanghai-Hong Kong Stock Connect. Currently, only select fund managers with approval from Beijing are allowed to invest in Shenzhen, though all investors can access the bigger Shanghai Stock Exchange through the Hong Kong link.
The Hong Kong Stock Connect had a lackluster start after its launch in November 2014. Volumes also have dwindled since the summer's market turmoil and Beijing's surprise devaluation of the yuan.
Some say global investors may take more of a shine to the link with Shenzhen, home to a number of so-called new economy companies in sectors including technology, pharmaceuticals and clean energy.
"That combination of private sector and new economy is a better combination for international investors than the Shanghai market, which tends to be dominated by larger, state-owned companies," said Erwin Sanft, head of China strategy at Macquarie Securities Group.
In March, China's Premier Li Keqiang said the Shenzhen link would launch at "an appropriate time," but didn't set a time frame.
The chairman of Hong Kong Exchange and Clearing, Charles Li said in August the technical preparations for the Shenzhen-Hong Kong Stock Connect had been completed.
The trading link would mark the latest in a raft of officials' measures, as the central bank responds to pressure to open up China's financial markets. China has been vying for the yuan's inclusion in the International Monetary Fund's elite basket of reserve currencies, the composition of which will be determined at a meeting later this month.
Meanwhile, on Monday, HSBC Holdings PLC said it would establish a majority-owned securities joint venture in Shenzhen's free trade zone, as China starts easing restrictions on foreign securities firms operating in its tightly controlled capital market.
Global investors sold a net 4.48 billion yuan ($706.9 million) of Chinese stocks during October, the second month of net outflows since launch after an investor exodus in July. Turnover through Stock Connect has declined on a month-on-month basis every month since June, according to data from HKEx.
In China, the Shenzhen Composite Index jumped 3.3%, while the ChiNext Price Index, composed largely of growth stocks and occasionally referred to as China's Nasdaq, rose 4.4%.
Chinese brokerages jumped too, with Citic Securities Co. up 9%, GF Securities Co. gaining 5.9% and Haitong Securities Co. rising 8.5%.
Shenzhen-listed companies with Hong Kong listings also rose, with Shandong Molong Petroleum Machinery Co., which sells drilling parts to China's oil companies, gaining 16.4%, and Zhejiang Shibao Co. a maker of automotive steering parts, surging 15%.
Yifan Xie, Jacky Wong and Dominique Fong contributed to this article.
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