Hong Kong’s Stock Connect must upgrade to lure more foreign investors, industry body says

Asia Securities Industry and Financial Markets Association suggests implementing block trades in Stock Connect programme

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Lyndon Chao of the Asia Securities Industry and Financial Markets Association. Photo: ASIFMA

Published: 7:30am, 26 Feb 2025Updated: 6:50pm, 26 Feb 2025

Foreign investors could become more confident about equity markets in Hong Kong and mainland China if enhancements were made to the Stock Connect programme, a financial industry group said, amid a rally driven by hopes for a policy shift from Beijing and enthusiasm about innovation in the technology sector.

Lyndon Chao, managing director of the equities and post trade division at the Asia Securities Industry and Financial Markets Association (ASIFMA), said last week that changes to the 10-year-old trading channel would improve liquidity and give global investors more confidence about stocks in Hong Kong and on the mainland.

After years of losses, stock indexes in Hong Kong and on the mainland have been bolstered recently by a rally in tech stocks, thanks in part to a revelation by start-up DeepSeek that it developed two large language models at a fraction of the cost and computing power required by US competitors. Inflows from foreign passive funds and mainland investors via Stock Connect have grown recently, according to public data.

Chao said implementing block trades – sales of large volumes of securities that are privately negotiated between parties – in the Stock Connect would be a welcome improvement. He said block trades provided greater certainty in terms of price and execution, adding that the connect programme is “still a very vanilla pipe for buying and selling” shares.

In 2023, the China Securities Regulatory Commission and Hong Kong’s Securities and Futures Commission said they would introduce block trading in the connect programme, though implementation is still being worked out.

“We expect the first phase of implementation sometime this year,” Chao said. “It may help improve market liquidity if investors are able to trade through Stock Connect as they do in other markets, further boosting market confidence.”

Another enhancement, Chao said, would be to keep Stock Connect operational during Hong Kong holidays when mainland Chinese markets were open. At the moment, northbound trading was unavailable during Hong Kong holidays even though mainland markets remained open, which limited investor participation, Chao said.