[ti:China Opens Shanghai Stock Market to Hong Kong] [ar:Mario Ritter] [al:Economics Report] [by:www.51voa.com] [00:00.00]From VOA Learning English, this is the Economics Report. [00:05.75]Investors in Hong Kong and Shanghai [00:09.40]may now invest in a limited group of securities [00:13.42]on either city's stock exchange. [00:16.58]C. K. Chow is the chairman of Hong Kong Exchanges and Clearing. [00:22.84]He called the move "a breakthrough [00:26.08]in the opening of China's financial markets [00:29.15]and an important milestone in the development of Hong Kong." [00:33.87]He said the new way [00:36.85]to invest made Hong Kong a gateway [00:40.31]between mainland China and international investors. [00:44.42]The Shanghai-Hong Kong Stock Connect [00:48.68]gives investors the ability [00:51.40]to buy stocks listed in mainland China. [00:54.35]It also permits Chinese investors to buy stocks listed in Hong Kong. [01:00.55]There are limits, however, [01:03.59]to the value and the kinds of stocks that can be traded. [01:08.04]Investors may trade only a total [01:11.66]of $3.8 billion-dollars-worth of stocks each day. [01:17.57]Julian Evans-Pritchard is a China economic expert [01:22.07]at Capital Economics based in Singapore. [01:25.80]He told VOA's Victor Beattie [01:29.30]that the move to open the stock exchanges [01:32.63]to each other was important. [01:35.02]But Mr. Evans-Pritchard noted that [01:39.33]the total value of stock [01:41.24]that can be traded is a relatively small quota. [01:45.10]"The immediate impact of the scheme [01:47.95]is not likely to be that big and that is partly [01:52.03]because regulators are taking a very cautious approach [01:54.98]to limiting the quota to about one percent [01:58.18]of the market capitalization of each market." [02:00.12]Mr. Evans-Pritchard says, [02:02.72]if the quota is filled, [02:04.71]officials may see a reason to increase it over time [02:09.04]and open up the exchange further. [02:11.78]The stock plan represents a limited reform measure. [02:16.62]Mr. Evans-Pritchard says what is important [02:21.09]is that China is opening up its capital account [02:24.95]to foreign investment money, [02:26.84]which can come in or go out. [02:29.87]China's stock market offerings [02:32.77]have had limited success in recent years. [02:36.05]The biggest public stock offering by a Chinese company, Alibaba, [02:41.97]took place on the New York Stock Exchange rather than within China. [02:47.25]It was not clear if Chinese officials would approve the plan. [02:52.48]Mr. Evans-Pritchard notes [02:55.56]that the protests in Hong Kong had raised questions [02:59.35]about whether Chinese officials would permit the plan, [03:02.94]or scheme, to go forward. [03:05.75]"I know some people had talked about the scheme [03:09.81]being cancelled as a result of the Hong Kong protest [03:12.75]as a kind of punishment. [03:14.44]But, I don't think that was in their interest." [03:16.50]Michael McCormack is a financial advisor and executive director [03:21.34]at Z-Ben Advisors based in Shanghai. [03:24.94]He says the move is a major change [03:28.54]that could increase the number of shareholders. [03:31.72]"I think it's likely that we're going to see [03:34.26]a lot of the state-owned firms in China - [03:36.01]companies where one branch of the government [03:38.31]or another owns 40 to even 80 percent of the firm - [03:41.60]try to sell off their shares into the market [03:44.15]and broaden the shareholding base. [03:45.82]Both inside China and internationally... [03:47.82]That would be the really significant change." [03:50.48]And that's the Economics Report from VOA Learning English. [03:55.92]I'm Mario Ritter.