Trade Harmonization Proposal: Aligning Hong Kong's Market Days with Mainland China's Schedule
In a move aimed at enhancing cross-border trading and market integration, the Stock Connect program - the investment channel linking stock trading in Hong Kong with Shanghai and Shenzhen - has made significant strides in aligning its holiday trading calendar with the mainland.
The goal is to align holiday trading on Stock Connect with the mainland, ensuring that both markets operate on the same days off. This alignment addresses a long-standing issue where different holiday schedules between the two markets disrupted trading on Stock Connect, as one market was open while the other was closed.
This mismatch led to reduced cross-border trading activity, settlement complications, increased operational risk, and liquidity gaps. By coordinating holiday calendars, cross-border trading continuity and operational efficiency are improved. Aligning holidays ensures that Stock Connect trading can function smoothly with synchronized settlement cycles, reducing settlement risk and supporting better price discovery and liquidity sharing.
The Stock Connect program offers more opportunities for mainland investors in Hong Kong and easier mainland access for international investors. The northbound and southbound turnover of the Stock Connect program accounts for around 6% and 18% of the total turnover of the mainland and Hong Kong markets, respectively.
Hong Kong's stock market, dominated by Chinese companies, typically stops trading during some public holidays. However, some local holidays can be open for trading on the Stock Connect program. In recent years, Hong Kong's stock exchange has been enhancing its services during non-trading days.
Last year, the northbound and southbound average daily turnover of the Stock Connect program was approximately 150 billion yuan (US$20.7 billion) and HK$48.2 billion (US$6.2 billion), respectively. Since 2022, a large number of futures and options can be traded during holidays in Hong Kong.
The inclusion of additional trading days on the Stock Connect program calendar can potentially increase market liquidity and efficiency. This enhancement for both the northbound and southbound routes is expected to further boost cross-border capital flows and market integration.
[1] Source: Proposed extended settlement hours in UK payments system (https://www.bankofengland.co.uk/market-infrastructure/payments/2019/proposed-changes-to-the-uk-real-time-gross-settlement-system-rtgs-consultation-paper)
- To optimize financial investments and strengthen cross-border business relationships, the alignment of trading holidays on the Stock Connect program with the mainland's holiday schedule is crucial, as it reduces operational risks, improves settlement efficiency, and promotes better price discovery and liquidity sharing between the two markets.
- The expansion of trading days on the Stock Connect program calendar, including trading during holidays, could potentially increase market liquidity and efficiency, further boosting cross-border capital flows and deepening business integration, thereby making investing in both mainland and international markets more attractive.
