A government minister indicated new connect scheme mechanism should stimulate trading, helping the hub recover lost ground.
A yuan-denominated trading system using a market-maker mechanism will be set up in the first half of 2023, according to the «South China Morning Post», a local English language daily newspaper (registration, eventual paywall) that cited a government minister discussing the developments with lawmakers Monday.
The SCMP indicated the plan was first announced last month and it was endorsed by the China Securities Regulatory Commission (CSRC) last month.
The government intends to launch the new market-maker mechanism together with the Hong Kong Stock Exchange as part of an effort to enhance the city's position as a financial center. As finews.asia recently reported, Singapore has overtaken Hong Kong to become the third leading international financial center worldwide due to the extended period of strict COVID-19-related travel restrictions.
Little Trading
The exchange has allowed companies to issue yuan-denominated shares since 2010 but limited turnover has prompted very few of them to take that step, the SCMP indicated.
Christopher Hui Ching-yu, the government secretary for financial services and treasury, indicated to the newspaper that a market-maker mechanism will alleviate this, as it helps liquidity, limiting spreads as well as excessive price fluctuations.
According to the SCMP, the government intends to submit a bill by the end of the year exempting market makers from having to pay stamp duty if they are providing liquidity for yuan-denominated equities. Such duties currently account for 90 percent of trading costs, Hui indicated on Monday. Moreover, mainland-based traders can currently only trade city stocks in Hong Kong dollars, and this would remove an additional barrier and limit exposure to currency fluctuations.
