The Impact on A-H Dual Listed Stocks from Implementation of the Shenzen-Hong Kong Stock Connect PDF Download

Author: Yucheng Yang
Publisher:
ISBN:
Category : Investments, Foreign
Languages : en
Pages : 65

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Book Description
This study found that the correlation between the Shenzhen index, Shenzhen 100 index and Hang Seng index has decreased since the implementation of the Shenzhen Connect. Moreover, there is a decreased correlation for the 16 dual-listed stocks between Shenzhen and Hong Kong. It is possible that the high valuation of Shenzhen stocks compared to Hong Kong stocks is the main reason. This study used 16 dual-listed stocks in the Shenzhen Market with a two-year sample period from 1 January 2016 to 31 December 2017 as the sample to test the impact of the implementation of the Shenzhen Connect on price gap changes of these dual-listed stocks. Moreover, this study looks at the impact of interest rate changes in China and the US on the price gap of dual-listed stocks. This study found that the price gap was enlarged after the implementation of the Shenzhen Connect. The potential explanation includes different investment preferences between Chinese investors and Hong Kong investors. However, the results for the Shenzhen Connect does not appear to be robust to an alternate definition of the price gap variables. The study found Chinese investors are insensitive to interest rate changes in China. Moreover, an increase in the US interest rate will increase the price gap of dual-listed stocks since capital flow back to the US from Hong Kong detriments the Hong Kong stock market. At the same time, the interest rate difference between the US and China positively affects the price gap of dual-listed stocks. The positive coefficient might suggest a combination of the insensitivity of interest rate changes of Chinese investors and capital outflow from Hong Kong to the US. This study also examined liquidity preference hypothesis, asymmetric information hypothesis, demand elasticity hypothesis and risks preference hypothesis. Consistent results are found with other literature.

Author: Han-Ching Samprass huang
Publisher:
ISBN:
Category :
Languages : en
Pages : 8

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Book Description
This paper investigates the impact of “Shanghai-Hong Kong Stock Connect Policy” on price difference and announcement effects of A Shares and H Shares, using daily data from Aug., 2014 to Feb., 2015. Data were obtained from Bloomberg. To be comparable, we collect simultaneous trading data. We find that listed time and SSE 180 sample share variables have a significant effect on price difference. The price difference after Shanghai-Hong Kong Stock Connect Policy is bigger than the price difference before Shanghai-Hong Kong Stock Connect Policy. Moreover, we find that implementation of the Shanghai-Hong Kong Stock Connect Policy has announcement effects.

Author: Patrick Müller
Publisher: diplom.de
ISBN: 3836609967
Category : Business & Economics
Languages : en
Pages : 122

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Book Description
Inhaltsangabe:Abstract: This paper aims at explaining the phenomenon of price anomalies between dual-class shares of companies located in mainland China (hereafter China). A-shares listed on either the Shanghai Stock Exchange (SHSE) or Shenzhen Stock Exchange (SZSE) command a premium over the price of the corresponding firm s H-shares traded at the Stock Exchange of Hong Kong (HKSE). This pricing puzzle arises from the segmentation of Chinese equity markets H-shares may be exclusively acquired by Hong Kong residents and international investors whereas A-shares are restricted to mainland Chinese investors. Although both classes of stock are entitled to the same future cash flows, investors are only willing to buy H-shares at a price significantly lower than that of A-shares. This unique setup offers the opportunity to test competing theories about the effects of market segmentation on asset pricing and to examine the factors that induce the price gap between cross-listed shares on different stock exchanges. Knowledge of the variables determining the price spread between H- and A-shares can make valuable contributions in a number of ways. Firstly, companies in mainland China pursuing initial public offerings (IPO) or seasoned equity offerings (SEO) may base their financing decision on a more thorough understanding of the parameters affecting stock prices of cross-listings in the respective markets. Secondly, policymakers in emerging country stock markets may draw conclusions concerning the design of foreign ownership regulation and investment restraints imposed on domestic and foreign investors. Lastly, international and local investors may build on a more profound understanding of the H- versus A-share discount (hereafter H-share discount) to narrow down attractive investment opportunity sets, especially in the light of the latest regulatory changes on the Chinese equity market. As of August 2007 the government body monitoring and regulating the national currency, China s State Administration of Foreign Exchange (SAFE), loosened its rigorous foreign exchange policy. Prior to the recent SAFE ruling, the annual amount to be freely converted from Chinese Yuan Renminbi (RMB) into foreign currencies was capped at a 50,000 United States Dollar (USD) limit. Under the new regime, mainland retail investors are granted unlimited convertibility of RMB into Hong Kong Dollar (HKD) given that investments flow into the Hong Kong securities market. In the [...]

Author: Flora Huang
Publisher:
ISBN: 9781509949311
Category : Electronic books
Languages : en
Pages : 0

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Book Description
This significant and timely book explores a novel market mechanism, Stock Connect, which gives mutual market access to Chinese and international investors, and provides original analyses and fresh insights. This mechanism could become the new normal in future global financial integration. By examining this cross-border scheme from a regulatory perspective via a three-tiered analytical framework (investors, issuers and regulators), this book unearths the profound implications of Stock Connect to local and global financial markets and the legal impediments to its implementation. It covers a broad range of topics in this cross-boundary investment channel, including an overview of four existing connectivity arrangements (Shanghai-Hong Kong, Shenzhen-Hong Kong, Shanghai-London and China-Switzerland), the uniqueness of these connectivity arrangements, investor protection, regulations of connect issuers, regulatory cooperation and enforcement, the impacts on local and global financial markets, the implications for the world market connectivity as well as the challenges and future of Stock Connect. This pioneering study will appeal to a broad range of readers who are interested in the on-going reshaping of international financial systems and China's emerging influence in the international financial order.

Author: Michael J. Aitken
Publisher:
ISBN:
Category :
Languages : en
Pages : 37

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Book Description
The economic growth of China has seen an increase in its demand for capital, fuelling its local stock markets. This paper examines a market liberalisation event between China and Hong Kong and its impact on market liquidity and price convergence for cross-listed stocks in the two markets. On November 17, 2014, the Shanghai Stock Exchange and the Hong Kong Stock Exchange introduced the Shanghai-Hong Kong Stock Connect (SHHKConnect), a bilateral investment channel between the two markets. The new channel brings with it accesses to new capital for domestic firms and trading expertise from new foreign participants for both regions. The SHHKConnect permits mutual market access for market participants, facilitating trade in each market using existing trading infrastructure. This study adopts a difference-in-difference methodology and finds that market liquidity as proxied by transaction costs, improves in both markets, for eligible stocks that are traded through the bilateral investment channel, three-months post November 17, 2014. Over a longer event horizon of six-months, liquidity in China continues to improve, whereas in Hong Kong it decreases. In addition, reported results identify that the pre-existing price premium between cross-listed China A-shares and Hong Kong H-shares, increases following the market design change. We attribute the increase in price divergence to the incremental improvement in liquidity in China vis-à-vis Hong Kong.

Author: Karen Xiaotong Wang
Publisher:
ISBN:
Category : Stock exchanges
Languages : en
Pages : 0

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Book Description
The economic growth of China has seen an increase in its demand for capital, fueling its local stock markets. This paper exams a market liberalisation event between China and Hong Kong and its impact on: (1) market liquidity and (2) price differentials between cross-listed stocks across the two markets. On November 17, 2014, the Shanghai Stock Exchange and the Hong Kong Stock Exchange introduced the much anticipated, Shanghai-Hong Kong Connect, a bilateral investment channel between the two markets. The new channel brings with it accesses to new capital for domestic firms and trading expertise from new foreign participants. The Shanghai-Hong Kong Connect permits mutual market access for market participants, allowing investors in each market to trade in the other market using existing trading infrastructure. This study adopts a difference-in-difference methodology and finds that market liquidity as proxied by transaction costs, improves in both markets, for eligible stocks that are traded through the bilateral investment channel, post November 17, 2014. This result is consistent with literature, which identifies the benefits of open and enhanced market access. In addition, reported results identify that the pre-existing price premium between cross-listed China A-shares and Hong Kong H-shares, increases following the market design change. Contrary to expectations, this result is attributed to the incremental improvement in liquidity in China for cross-listed stocks vis-à-vis Hong Kong. Overall, results in this study demonstrate that the partial liberalisation of fund flow between the two markets had a positive impact on liquidity, in particular for China's largest equity market the Shanghai Stock Exchange.

Author: Nicolo Angerer
Publisher:
ISBN:
Category :
Languages : en
Pages :

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In this paper, the well-known AH share price disparity in the Chinese financial market is tackled by analysing dual listed companies with outstanding A-shares listed on a Chinese stock exchange, as well as outstanding H-shares on the Hong Kong stock exchange. Despite the capital liberalization efforts of recent years and against the theories of classical finance, A-shares with identical voting and dividend rights are on a weighted average around 30% more expensive than their counterpart H-shares. The objective is to analyse the established explanations for this share price disparity by employing several multiple regressions on 63 stock pairings over the time horizon of 2006 - 2016. The paper at hand differs from existing research in terms of a lower degree of segmented markets due to most recent liberalization efforts and therefore a different regulatory environment, and furthermore a longer time horizon and a higher number of available stock pairings. The paper concludes that A-share premiums can partially be explained by differences in required returns due to differences in risk and volatility of the two share types. Furthermore, a significant impact on the premium of factors that capture the differences in the supply of the shares as well as liquidity differences in the markets is observed. Evidence is mixed on the impact of information asymmetries as well as speculative behaviour in the A-share market. On the other hand, no significant impact of differences in the underlying currency risk could be confirmed.

Author: Flora Xiao Huang
Publisher: Routledge
ISBN: 1134671113
Category : Social Science
Languages : en
Pages : 326

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Book Description
Listing by companies from one country on the stock market of another country is a device often used both to raise capital in, and to increase bonding with, the target country. This book examines the listing by Chinese companies on the Hong Kong stock market. It discusses the extent of the phenomenon, compares the two different regulatory regimes, and explores the motivations for the cross-listing. It argues that a key factor, in addition to raising capital and bonding with the Hong Kong market, is Chinese companies’ desire to encourage legal and regulatory reforms along Hong Kong lines in mainland China, in order to develop and open up China’s domestic capital markets.

Author: Yang-Chao Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 10

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Book Description
China has been intensively launching opening-up policies since November 2014. Among these policies, the Shanghai-Hong Kong Stock Connect offers international investors an approach to investing directly in Mainland China stock markets. At the same time, Mainland China capital can gain access to overseas markets via Hong Kong. This study investigates the influence of the policy by using the Vector Autoregressive and Generalized Autoregressive Conditional Heteroscedastic framework. The results show that the new policy has different impacts on the Shanghai, Shenzhen, and Hong Kong stock markets due to their distinct market features and policy restrictions. The three markets also transmit the policy effects to one another due to their close linkages. It not only indicates that Mainland China financial centers (Shanghai and Shenzhen) integrate with one of international financial centers (Hong Kong), but also symbolizes the gradually increasing strength of Chinese policy effects on global capital markets.

Author: 林娟卉
Publisher:
ISBN:
Category :
Languages : en
Pages :

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