Hong Kong Law
Shenzhen-Hong Kong Stock Connect to Launch on 5 December 2016
Shenzhen-Hong Kong Stock Connect (Shenzhen Connect) launches on Monday, 5 December 2016.
Modelled on the Shanghai-Hong Kong Stock Connect scheme (Shanghai Connect) that has been in place since November 2014, Shenzhen Connect is a much anticipated channel for Mainland investors to trade in Hong Kong-listed stocks and for Hong Kong and international investors to invest directly in Shenzhen-listed stocks. Hong Kong and international investors will be offered new opportunities for direct investment in stocks listed on the Shenzhen Stock Exchange (SZSE) which ranks as the world's 8th largest stock market both in terms of market capitalisation (US$ 3.3 trillion at 30 September 2016) and in terms of IPO funds raised - IPOs on the SZSE raised US$ 4.2 billion in the first three quarters of 2016.1 Significantly, Shenzhen Connect will offer international investors a broader range of Chinese companies for investment, with opportunities for institutional (but not retail) investors to buy stocks listed on Shenzhen's ChiNext market which caters for tech and other innovative companies. Shenzhen Connect will offer Mainland investors a broader investment scope, while Hong Kong-listed companies will benefit from a larger investor pool.
On 5 November 2016 the Ministry of Finance (MOF), State Administration of Taxation (SAT) and China Securities Regulatory Commission (the CSRC) of the People's Republic of China (the PRC) have issued a joint notice confirming the PRC taxation policy regarding Shenzhen Connect.
Key summary of Shenzhen Connect tax policy
The joint notice issued by the MOF, SAT and the CSRC sets out the taxation policy applicable to Mainland and Hong Kong investors and requirements relating to value-added tax and stamp duty. This is largely similar to the PRC's tax policy for Shanghai Connect.
Investors of the Hong Kong market
Shenzhen Connect information seminar on 30 November 2016 at the Hong Kong Stock Exchange
On 30 November, Hong Kong Corporate Counsel Association, Charltons and HKEx co-organised a seminar on the Shenzhen-Hong Kong Stock Connect at the Exchange Auditorium, where Mr. Tae Yoo, managing director at the client and marketing services, market development of the HKEx and Julia Charlton, partner of Charltons, were speakers at the event. Julia Charlton's speech covered the legal aspects of the launch including beneficial ownership of Shenzhen Connect shares, asserting rights over SZSE assets, PRC foreign shareholding restrictions, short selling reporting requirements etc. The slides of the presentation are available for download at //www.charltonslaw.com/hong-kong-law/shanghai-hong-kong-stock-connect-and-shenzhen-hong-kong-stock-connect-update-a-new-chapter-in-connecting-international-and-chinese-investors/.
The following Stock Exchange publications on Shenzhen Connect have been issued:
Source: World Federation of Exchanges website (data as of 10 November 2016).↩
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Charltons - Hong Kong Law Newsletter - Issue 350 - 02 December 2016