Stock Connect: How Mainland Investors Buy Hong Kong Stocks
Stock Connect lets mainland investors trade selected Hong Kong stocks from their A-share account: quoted in Hong Kong dollars, settled in yuan, and open only on days when both markets can trade.
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Text version · Hong Kong Stock Rules, lesson 6: “Stock Connect: How Mainland Investors Buy Hong Kong Stocks”
Stock Connect lets mainland investors trade selected Hong Kong stocks from their A-share account: quoted in Hong Kong dollars, settled in yuan, and open only on days when both markets can trade.
Buying Hong Kong stocks from a mainland account
Southbound Stock Connect lets mainland investors trade selected Hong Kong stocks (including many H share) through the Shanghai and Shenzhen exchanges and their local broker. Individuals generally need account assets of at least 500,000 yuan; check your broker's requirements.
Tradable only when both markets are open
A day is a Stock Connect trading day only if both Hong Kong and the mainland are open and settlement can be arranged. During long mainland holidays Hong Kong keeps trading but Stock Connect stops: the price moves, and you can't trade.
Quoted in Hong Kong dollars, settled in yuan
Hong Kong stocks are quoted in Hong Kong dollars but Stock Connect settles in yuan, so your gains and losses depend on the exchange rate as well as the share price. What you buy through Stock Connect is still a Hong Kong stock: traded in whole lots, settled T+2, with no price limit.
Key takeaways
- Mainland individuals generally need at least 500,000 yuan in their securities and cash accounts to open Stock Connect; check your broker's exact requirements.
- A day is a Stock Connect trading day only if both markets are open and settlement can be arranged; during long mainland holidays Hong Kong keeps trading but Stock Connect is suspended.
- Hong Kong stocks are quoted in Hong Kong dollars but Stock Connect settles in yuan, so you can gain or lose from the exchange rate even if the share price doesn't move.
- What you buy through Stock Connect is still a Hong Kong stock: traded in whole lots, settled T+2, with no price limit.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Choose “Mainland long holiday”: on how many days in the two weeks is Hong Kong open while Stock Connect can't trade?
- Click one of the days: if Hong Kong stocks plunged that day, could you sell your Stock Connect holdings?
- Choose “Hong Kong holiday”: on a day when the mainland is open, can Stock Connect trade?
- Move the exchange rate from 0.92 to 0.88: the share price hasn't changed, so how much is your yuan value down?
Quiz and explanations
- 1. What asset requirement do mainland individuals generally need to open Stock Connect?
- Answer: 500,000 yuan.The general requirement is at least 500,000 yuan in your securities and cash accounts (check your broker's exact rules).
- 2. On a day when Hong Kong is open but the mainland is on holiday, can Stock Connect investors trade Hong Kong stocks?
- Answer: No, Stock Connect is suspended, but Hong Kong prices keep moving.Stock Connect only opens on days when both markets can trade; while it's suspended, Hong Kong keeps trading and your holdings still move, but you can't buy or sell.
- 3. Which currency settles a Hong Kong stock bought through Stock Connect?
- Answer: Yuan, and you bear the exchange-rate risk.Hong Kong stocks are quoted in Hong Kong dollars and Stock Connect settles in yuan; changes in the HKD/CNY rate also affect your gains and losses.
Terms in this lesson
- exchange rate (Exchange Rate): How much of one currency you get for one unit of another.
- H share (H Share): Shares of a company incorporated in mainland China and listed in Hong Kong. Some companies are listed both as A-shares and in Hong Kong, and the two prices often differ.
- Southbound Stock Connect: A channel for mainland investors to trade selected Hong Kong stocks through the Shanghai and Shenzhen exchanges and their local broker. Quoted in Hong Kong dollars and settled in yuan, it's only open on days when both markets can trade.