Cash & Liquidity ManagementInvestment & FundingCapital MarketsShanghai-Hong Kong Stock Connect Scheme Expanded

Shanghai-Hong Kong Stock Connect Scheme Expanded

Citi said that its depositary bank business is ready to enable alternative investment funds (AIF) and Undertakings for the Collective Investment of Transferable Securities (UCITS) funds registered in several European countries the ability to trade A-shares through the Shanghai-Hong Kong Stock Connect scheme.

Since Stock Connect launched in November, Citi has worked with key regulators, exchanges, leading law firms and industry associations in Hong Kong and across Europe, the Middle East and Africa (EMEA) to clarify and strengthen the legal and regulatory structure of Stock Connect for the required due diligence to allow AIF and UCITS funds to invest in A-shares through Stock Connect.

Citi was also first to develop the Model C solution, designed to overcome key challenges for these regulated funds to trade A-shares through Stock Connect, ensuring proper segregation of fund assets and allowing the assets to remain with a qualified custodian by eliminating the need for pre-delivery of shares to the local broker.

Model C also enables these funds to settle A-shares via receive vs payment/delivery vs payment (RVP/DVP) method to avoid counterparty risk with local brokers. To access Stock Connect, fund managers will need to comply with Citi’s standard terms and conditions, and have completed their due diligence on the suitability of investing through Stock Connect for the relevant fund

“We are most excited to see the regulators and exchanges in Mainland China and Hong Kong working together and overcoming many challenges to launch Stock Connect in such a short period of time,” said Cindy Chen, Hong Kong head of securities services, Citi.

“We are pleased to announce today that Citi is now ready to enable international investors to access Stock Connect by providing a solution that allows them to comply with the regulatory regime of their domicile countries and to transact in a safe and efficient way.”

“Citi is pleased to support the development of the A-share market and the internationalisation of the renminbi [RMB],” added Paulus Mok, Head of Markets for Greater China, Citi.

“Enabling offshore funds to transact A-shares through Stock Connect will help improve A-share market fundamentals and efficiency by bringing in more diversified, stable and high quality long term institutional investors.”

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