December 5 of 2018 marks the second anniversary of the Shenzhen-Hong Kong Stock Connect. With steadily growing transaction volume, ever-better mechanism and increasingly prominent functions over the past two years, the cross-boundary investment channel has become the most important access for foreign investors to the Chinese capital market and a bridge linking global investors with China which allows them to share the fruits of China's innovation economic growth. SZSE embraces the opening-up strategy of China and takes an active part in serving the Belt and Road Initiative. In the past two years, it advanced steadily on the course of going global by launching the Shenzhen-Hong Kong Stock Connect and composed a brilliant chapter in opening the Chinese capital market to the outside world in the new era.

Stable operation for two years with total turnover topping CNY 4 trillion

Over the last two years, SZSE vigorously collaborated with all related parties including Hong Kong Exchanges and Clearing Limited (HKEX) and China Securities Depository and Clearing Corporation Limited (CSDC) to ensure all-around smooth operation of the Shenzhen-Hong Kong Stock Connect. As of December 5, the Shenzhen-Hong Kong Stock Connect has hit a total turnover of CNY4.15 trillion. Specifically, Shenzhen Stock Connect has run for 467 trading days, achieving a total turnover of CNY2.87 trillion and daily average turnover up 524.85% from CNY1.541 billion in the initial month after launch to CNY9.629 billion in the latest month. Hong Kong Stock Connect, having run for 458 trading days, hit a total turnover of CNY1.28 trillion, with daily average turnover up 478.19% from CNY454 million in the initial month after launch to CNY 2.625 billion in the latest month. Playing an increasingly vital role in the two-way opening up in the Chinese capital market, the Shenzhen-Hong Kong Stock Connect has become a key channel for foreign investors to invest in China and contributed a lot to the optimized investor structure of the A-shares market.

Improving mechanism to attract international long-term funds

Under the CSRC unified leadership and deployment, SZSE has made praiseworthy efforts to optimize the Shenzhen-Hong Kong Stock Connect mechanism, in a bid to better satisfy the needs of global investors and attract international long-term funds. In 2018, a range of measures like increasing daily trading limits and the northbound see-through mechanism have been taken for better cross-border and cross-market regulation. In so doing, SZSE fosters a good market environment for investors and provides new momentum for further development of the Shenzhen-Hong Kong Stock Connect. Such measures have garnered vigorous support of global investors. Statistics reveal that Shenzhen Stock Connect has seen significant increase in average daily turnover since MSCI A-share inclusion on May 31. The average daily turnover hit CNY9.01 billion over the three-month time frame from May 31 to August 31, up 6.26% over the previous three-month period. What's more, after an increase of A-shares' weighting in the MSCI Index on August 31, Shenzhen Stock Connect experienced even brisker transactions, with average daily turnover up to CNY9.629 billion in the latest month and its proportion in transaction volume of underlying securities increasing from 0.54% in the initial month after launch to 3.91% in the latest month. As of December 5, there were 21 underlying securities in which Shenzhen-Hong Kong Stock Connect investors have a shareholding of over 5%, 12 more than that in last year. Among those, five securities feature a shareholding of over 10%.

Cross-border investment with Shenzhen characteristics and growing build-up effect of innovation capital

Over the past two years, the SZSE-listed companies have garnered wider recognition of global investors. An increasing number of foreign investors access the Chinese market via Shenzhen-Hong Kong Stock Connect to take a share of the spoils of China's economic structure transformation and upgrading. The Shenzhen global innovation capital formation center has seen a growing build-up effect. Seen from the distribution of Shenzhen Connect funds, global investors have a preference over emerging industries and hi-tech businesses. Transactions in the SME Board and the ChiNext Board account for 55.87% of the total amount and the market value of shareholding accounts for 46.29%. As of December 5, four of the five securities in which the Shenzhen-Hong Kong Stock Connect investors hold more than 10% were on the SME Board and the ChiNext Board; and 61.54% of the newly added securities in which the Shenzhen-Hong Kong Stock Connect investors hold more than 5% were on the SME Board and the ChiNext Board. These figures reflect well on the innovation economy feature of SZSE market.

Due to the great charm of Shenzhen innovation economy, Shenzhen Stock Connect achieved a larger proportion in northbound transactions from 26.05% in the initial month after launch to 44.65% in the latest month. Foreign funds keep flowing in over the two years since the launch of Shenzhen-Hong Kong Stock Connect. As of December 5, the net buying of Shenzhen Stock Connect totaled CNY266.837 billion and that of Hong Kong Stock Connect aggregated CNY156.539 billion, with the net inbound cash flow reaching CNY110.298 billion.

Accelerating full opening-up and writing a new chapter on the course of going global

On one hand, SZSE makes an unceasing effort to ensure stable operation of Shenzhen-Hong Kong Stock Connect and optimize the stock connect mechanism. On the other hand, under the unified deployment of CSRC, it earnestly follows the general requirements of opening the capital market to the outside world in its practices, vigorously supports national strategies including the Belt and Road Initiative, RMB internationalization and Guangdong-Hong Kong-Macao Great Bay Area construction and promotes win-win international cooperation through multiple channels. Actions taken by SZSE include the following: First, in-depth involvement in capital market construction in the Belt and Road countries via equity cooperation. It bought into Pakistan Stock Exchange and Dhaka Stock Exchange (Bangladesh) and sought sustainable technological cooperation with stock exchanges in several Belt and Road countries to make a breakthrough in cross-border infrastructure and technological cooperation of China's stock exchanges. Second, enhanced exchanges with regulators, stock exchanges and market institutions to deepen the cooperation between China and ASEAN capital markets. Third, building a global cross-border financing and investment platform by extending the reach of the V-Next platform to over 30 countries including Britain, Germany, France, Russia, Canada and Australia etc. It's worth noting that the V-Next ELITE Alliance Shenzhen Station between SZSE and London Stock Exchange is put on the list of key achievements of Sino-British economic and financial talks. Fourth, playing an active role in international industrial organizations. In recent years, SZSE became a partner exchange of the United Nations Sustainable Stock Exchanges (UNSSE) initiative and joined the International Capital Market Association (ICMA) and the Asian Financial Cooperation Association (AFCA) to share its front-line regulation and market development experience and enhance and expand the global influence of China's capital market.