Curtailing Real-Time Stock Connect Data Will Make Market More Stable, Insiders Say

The Hong Kong Stock Exchange has recently ceased providing certain real-time data for northbound trading under the Stock Connect program, a move that is seen by market insiders as reducing transparency but increasing stability [para. 1]. The specific data no longer available includes real-time figures for sales, purchases, and total turnover through the northbound link, which facilitates overseas investors in trading stocks listed on the Chinese mainland via Hong Kong. This change took effect from Monday as per a circular from the exchange [para. 2].

Additionally, the real-time display of the remaining daily purchase quota for northbound investors will now only be shown when it falls below 30% of the total quota [para. 3]. These adjustments are intended to align with the practices of mainland exchanges in Shanghai and Shenzhen as stated in the circular [para. 4]. Originally, the disclosure norms for the northbound link were established to inform investors about how trading quotas were being utilized. However, these practices differed from those on the mainland, prompting a reevaluation [para. 5].

A key principle of the Stock Connect program is to adhere to regulations prevalent in target markets. Thus, disclosures related to northbound trading are expected to follow rules set by Shanghai and Shenzhen exchanges [para. 6]. It was also pointed out that another major route for foreign capital into mainland stock markets—the Qualified Foreign Institutional Investor program—does not provide such real-time data. Therefore, continuing to do so under Stock Connect was deemed inappropriate [para. 7].

The rationale behind these changes extends beyond regulatory alignment. According to Yan Zhaojun, a strategist at Zhongtai Financial International Ltd., this shift aims at curbing market fluctuations which were exacerbated by speculators using real-time data for making swift investment decisions [para. 8]. Furthermore, Yan Kaiwen from China Fortune Securities Co. Ltd., suggests that these adjustments could encourage northbound investors towards more long-term investments rather than speculative short-term trades [para. 9].

Overall, while these changes might reduce some aspects of market transparency, they are viewed as steps towards greater regulatory consistency and potentially fostering a more stable and less volatile investment environment within Chinese mainland stock markets accessed via Hong Kong's Stock Connect program.