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The Core Securities is managed by a team of seasoned financial professionals from Greater China Region and overseas. With our experienced market research team and professional wealth management consultants, we strive to provide our clients the comprehensive and customized financial solutions.
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Shanghai–Hong Kong Stock Connect Northbound Service
Notice to processing of Personal Data:
To comply with the requirements of the Investor ID Model for Northbound Trading under the Stock Connect (the “NB Investor ID Model”), The Core Securities Company Limited (“TCSC”) will be required to assign a unique number to each of their Northbound trading clients (i.e.a “Broker-to-Client Assigned Number” or “BCAN”) and provide the corresponding investor identification information (i.e. “Client Identification Data” or “CID”) to The Stock Exchange of Hong Kong Limited before they submit client orders for Northbound trading, and tag the BCAN to every Northbound order on a real-time basis. As BCANs are assigned by TCSC to uniquely identify TCSC’s clients, BCANs may constitute personal data pursuant to the Personal Data (Privacy) Ordinance (Cap. 486) (the “PDPO”). As such, TCSC is required to comply with all applicable requirements under the PDPO when collecting, storing, using, disclosing and transferring personal data under the NB Investor ID Model. In light of the above, you are required to (i) read the Personal Information Collection Statement concerning Northbound China Connect Orders (the “PICS”) carefully, which is uploaded to TCSC’s account opening section: https://www.tcsec.com/ENHome/Download; (ii) signify your consent by ticking the box in the Acknowledgement and Consent section in the PICS; and (iii) return the completed and signed PICS to TCSC. If you have any questions, please contact us via email: Inquiry@tcsec.com or phone: +852-3653-8888.
Important Notice
Risk Disclosure
The following risk disclosure statements cannot disclose all the risks involved.
You should undertake your own research and study before your trade or invest. You
should carefully consider whether trading or investment is suitable in light of
your own financial position and investment objective. You are advised to seek independent
financial and professional advice before you trade or invest. You should seek independent
professional advice if you are uncertain of or have not understood any aspect.
General
Investment involves risk. The price of securities/structured products may move
up or down. Losses may be incurred as well as profits made as a result of buying
and selling securities/structured products.
You should carefully consider whether any investment products or services mentioned
herein are appropriate for you in view of your investment experience, objectives,
financial resources and circumstances.
Risks of investing
in RMB denominated securities
Risks of investing in Shanghai-Hong
Kong Stock Connect Northbound Securities
Q1. What is Shanghai-Hong Kong Stock Connect?
Shanghai-Hong Kong Stock Connect is a securities trading and clearing links programme to be developed by Hong Kong Exchanges and Clearing Limited (HKEx), Shanghai Stock Exchange (SSE) and China Securities Depository and Clearing Corporation Limited (ChinaClear), aiming to achieve a breakthrough in mutual market access between the Mainland and Hong Kong.
Under Shanghai-Hong Kong Stock Connect, The Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of HKEx, and SSE will establish mutual order-routing connectivity and related technical infrastructure to enable investors of their respective market to trade designated equity securities listed in the other's market.
SSE Securities for trading by Hong Kong and overseas investors is called
"Northbound Trading"
.
SEHK Securities for trading by Mainland investors is called
"Southbound
Trading"
.
The information provided here has been summarized from the Hong Kong Exchanges and Clearing Limited. For more information please see the information provided at:
http://www.hkex.com.hk/eng/market/sec_tradinfra/chinaconnect/chinaconnect.htm
Our summary provided is entirely qualified by the materials provided by the Hong Kong Exchanges and Clearing Limited, and to the extent there is a conflict between the two, please refer to the Hong Kong Exchanges and Clearing Limited materials.
Q2. What's the trading hours for trading SSE Securities?
Northbound trading will follow SSE's trading hours. However, SEHK will accept Northbound orders from EPs five minutes before the Mainland market session opens in the morning and in the afternoon.
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Q3. Who can participate in Northbound Trading ?
All Hong Kong and overseas investors will be allowed to trade SSE Securities through Shanghai-Hong Kong Stock Connect.
Q4. Is there a quota?
Northbound Trading * under Shanghai-Hong Kong Stock Connect will, initially, be subject to a maximum cross-boundary investment quota (i.e., Aggregate Quota), together with a Daily Quota, which is monitored by SEHK.
The Northbound Aggregate Quota is set at RMB 300 billion.
The Northbound Daily Quota is set at RMB 13 billion.
Both the Aggregate Quota and the Daily Quota will apply on a "net buy" basis. Under that principle, investors will always be allowed to sell their cross-boundary securities regardless of the quota balance.
SEHK will publish the remaining balance of the Northbound Aggregate Quota and Daily Quota at scheduled times on the HKEx's website.
At the end of each trading day, SEHK will calculate the remaining balance of the Northbound Aggregate Quota:
Aggregate Quota Balance = Aggregate Quota – Aggregate Buy Trades + Aggregate Sell
Trades.
If Aggregate Quota Balance is less than Daily Quota, Northbound buying will be
suspended on the next trading day. However, investors can continue to sell SSE Securities,
which will then increase the Aggregate Quota Balance. SEHK will re-open Northbound
buying once the Aggregate Quota balance returns to the Daily Quota level or above.
*To facilitate Hong Kong and overseas investors trading in SSE Securities through Shanghai-Hong Kong Stock Connect (i.e. Northbound trading).
Q5. Does SSE price limit apply under Shanghai-Hong Kong Stock Connect?
For SSE Securities, there is a general price limit of a ±10% (and a ±5% for stocks under special treatment (i.e. ST and *ST stocks) in the risk alert board) based on previous closing price.
All orders input for SSE Securities must be withisn the price limit. Any orders with price beyond the price limit will be rejected by SSE. The upper and lower price limit will remain the same intra-day.
Q6. Investors will only be allowed to sell an SSE Security but restricted from further buying if:
(a) the SSE Security subsequently ceases to be a constituent stock of the relevant
indices; and/or
(b) the SSE Security is subsequently under "risk alert"; and/or
(c) the corresponding H share of the SSE Security subsequently ceases to be
traded on SEHK,
as the case may be.
Q7. Levies Arrangement
Fees and taxes applicable to a Northbound trade:
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Summary of taxes related to trading of SSE Securities by the Hong Kong and overseas investors via Shanghai Hong Kong Stock Connect:
- Capital gains tax / Business tax : Hong Kong and overseas investors are exempted from paying both capital gains tax and business tax, when they trade SSE Securities via Shanghai-Hong Kong Stock Connect.
- Stamp duty : Hong Kong and overseas investors are required to pay stamp duty arising from the sale and purchase of SSE Securities and the transfer of SSE Securities by way of succession and gift in accordance with existing Mainland taxation regulations.
- Cash dividend and/or Bonus shares : Hong Kong and overseas investors are required to pay tax on cash dividend and/or bonus shares of SSE Securities at a standard rate of 10%, which will be withheld and paid to the relevant tax authority by the respective listed companies. For those investors whose residing country has entered into a tax treaty with China which allows them enjoying a lower dividend tax rate, the investors may apply to the tax authority for a refund of the differences.
Please refer to the following notice for complete information regarding the taxes arrangement mentioned above:
The notice jointly issued by the Ministry of Finance (MOF), the State Administration of Taxation (SAT) and CSRC on 14 November 2014
http://szs.mof.gov.cn/zhengwuxinxi/zhengcefabu/201411/t20141114_1158461.html
Q 8. What is the trading and settlement currency?
Hong Kong and overseas investors will trade and settle SSE Securities in RMB only. Mainland investors will trade SEHK Securities quoted in HKD only and settle the trades with ChinaClear or its clearing participants in RMB.
Q 9. What is the clearing and settlement cycle?
Northbound trades * will follow the A share settlement cycle. For securities settlement, ChinaClear will debit or credit its clearing participants' (including HKSCC as clearing participant) stock accounts before 6:00pm on T day to settle their A share trades. To facilitate SSE Securities settlement cycle, HKSCC will conduct securities settlement on Northbound trades for its CPs via two rounds of Batch Settlement Runs at around 4:30pm and 6:00pm on T day. For money settlement of Northbound trades, it will be effected by around noon on T+1 day.
*To facilitate Hong Kong and overseas investors trading in SSE Securities through Shanghai-Hong Kong Stock Connect (i.e. Northbound trading).
Q10. What is the holiday arrangement?
In the initial stage of operation of Shanghai-Hong Kong Stock Connect, investors
will only be allowed to trade on the other market on days where both markets are
open for trading, and banking services are available in both markets on the corresponding
settlement days. This arrangement is essential in ensuring that investors and brokers
will have the necessary banking support on the relevant settlement days when they
will be required to make payments.
The following table illustrates the holiday arrangement of Northbound trading of
SSE Securities:
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Q11. Can investor do day trading on SSE Securities?
Day trading * is not allowed for Mainland A shares market. Therefore, Hong
Kong and overseas investors buying SSE Securities on T-day can only sell the shares
on and after T+1 day.
*Establishing and liquidating the same position or positions within one day's trading.
Fund and Stock TradingRisks of investing in RMB denominated securities
Market risk
There is a risk that the company's share price will drop below its initial IPO price,
once the company's shares commence trading on the stock market. Share price will
fluctuate over time, your investment in the product may suffer a loss even if the
RMB appreciates against HKD or other currencies.
Company risk
It is vital to understand the company and business being invested in. Investors
should study thoroughly the prospectus, financial report and even seek professional
advice before making the investment decision.
Liquidity risk
RMB equity products are a new type of investment product in Hong Kong. Regular trading
or an active secondary market may not develop in these products. Therefore you may
not be able to sell your investments in the RMB equity products on a timely basis,
or you may have to sell them at a deep discount to their value in order to find
a buyer.
Also, should the PRC central government tighten foreign exchange controls, the liquidity
of RMB or RMB equity products in Hong Kong will be affected and you may be exposed
to greater liquidity risk.
Currency risk
If you are a non-mainland PRC investor who holds a local currency other than RMB,
you will be exposed to currency risk if you invest in RMB equity products. You will
incur currency conversion costs, being the spread between buying and selling RMB,
when you convert between your local currency and RMB during the purchase and sale
of an RMB equity product.
Moreover, RMB is a restricted currency and subject to foreign exchange controls.
Although the PRC central government has relaxed the restrictions by allowing banks
in Hong Kong to conduct some forms of RMB business, RMB is still not freely convertible
in Hong Kong. You may not be able to convert RMB at your preferred time and/or in
your preferred amount or at all, which may lead to investment losses.
Exchange rate risk
As RMB equity products are traded and settled in RMB, they are exposed to exchange
rate risk. Even if the RMB/HKD exchange rate remains steady, and the price of the
RMB equity products you are holding does not change, you may not receive the same
amount of HKD when you sell the products due to the spread between buying and selling
RMB. RMB equity products are not an investment instrument for you to use to speculate
on movements of the RMB/HKD exchange rate.
Default risk
In general, RMB equity products are exposed to the usual kind of default risks that
might be associated with equity products denominated in other currencies.
RMB equity products exposed to the mainland China market are particularly subject to risks
that may arise from the relevant market/industry/sector in mainland China.
Over-subscribing to an IPO
In some cases, IPO may be oversubscribed. The company may go through an allocation
process to determine whether an investor will receive any shares and, if so, in
what quantity. An investor may be tempted to subscribe for more shares than he intends
to, if he thinks he will not receive the full amount in case of an over-subscription.
However, if the IPO is not oversubscribed, the investor will receive all the quantity
applied for and will incur the full cost.
Risks of investing in Shanghai-Hong Kong Stock Connect
Northbound Securities
Not protected by Investor Compensation Fund
Investors should note that any Northbound or Southbound trading under Shanghai-Hong
Kong Stock Connect will not be covered by Hong Kong's Investor Compensation Fund.
Hong Kong's Investor Compensation Fund is established to pay compensation to investors
of any nationality who suffer pecuniary losses as a result of default of a licensed
intermediary or authorised financial institution in relation to exchange-traded
products in Hong Kong. Examples of default are insolvency, in bankruptcy or winding
up, breach of trust, defalcation, fraud, or misfeasance.
As far as Southbound trading is concerned, since Mainland securities brokers are
neither licensees nor registered institutions with the SFC in Hong Kong and they
are not regulated by the SFC, the Investor Compensation Fund will not cover Southbound
trading via Shanghai-Hong Kong Stock Connect.
As for Northbound trading, according to the Securities and Futures Ordinance, the
Investor Compensation Fund will only cover products traded in Hong Kong's recognised
securities market (SEHK) and recognised futures market (Hong Kong Futures Exchange
Limited, HKFE). Since default matters in Northbound trading via Shanghai-Hong Kong
Stock Connect do not involve products listed or traded in SEHK or HKFE, so similar
to the case of investors trading overseas securities, they will not be covered by
the Investor.
Compensation Fund
For further information on Hong Kong's Investor Compensation Fund, please refer
to the website of Investor Compensation Company Limited.For information on licensees
and registered institutions under the SFC, please consult the Public Register of
Licensed Persons & Registered Institutions in the SFC website.
On the other hand, according to the Measures for the Administration of Securities
Investor Protection Fund 《證券投資者保護基金管理辦法》, the functions of China Securities Investor
Protection Fund (CSIPF, 中國投資者保護基金) include "indemnifying creditors as required by
China's relevant policies in case a securities company is subjected to compulsory
regulatory measures including dissolution, closure, bankruptcy and administrative
takeover by China Securities Regulatory Commission (CSRC) and custodian operation"
or "other functions approved by the State Council". As far as Hong Kong investors
participating in Northbound trading are concerned, since they are carrying out Northbound
trading through securities brokers in Hong Kong and these brokers are not Mainland
brokers, therefore they are not protected by CSIPF on the Mainland.
Quotas used up
When the respective aggregate quota balance for Northbound and Southbound trading
is less than the daily quota, the corresponding buy orders will be suspended on
the next trading day (sell orders will still be accepted) until the aggregate quota
balance returns to the daily quota level.
Once the daily quota is used up, acceptance of the corresponding buy orders will
also be immediately suspended and no further buy orders will be accepted for the
remainder of the day. Buy orders which have been accepted will not be affected by
the using up of the daily quota, while sell orders will be continued to be accepted.
Depending on the aggregate quota balance situation, buying services will be resumed
on the following trading day.
Trading day
As mentioned above, Shanghai-Hong Kong Stock Connect will only operate on days when
both markets are open for trading and when banks in both markets are open on the
corresponding settlement days. So it is possible that there are occasions when it
is a normal trading day for the Mainland market but Hong Kong investors cannot carry
out any A-share trading. Investors should take note of the days Shanghai-Hong Kong
Stock Connect is open for business and decide according to their own risk tolerance
capability whether or not to take on the risk of price fluctuations in A-shares
during the time when Shanghai-Hong Kong Stock Connect is not trading.
Restrictions on selling imposed by front-end monitoring
For investors who usually keep their A-shares outside of their brokers, if they
want to sell certain A-shares they hold, they must transfer those A-shares to the
respective accounts of their brokers before the market opens on the day of selling
(T day). If they fail to meet this deadline, they will not be able to sell those
A-shares on T day.
The recalling of eligible stocks
When a stock is recalled from the scope of eligible stocks for trading via Shanghai-Hong
Kong Stock Connect for above-mentioned reasons, the stock can only be sold but restricted
from being bought. This may affect the investment portfolio or strategies of investors.
Investors should therefore pay close attention to the list of eligible stocks as
provided and renewed from time to time by SSE and SEHK.
Currency risks
Hong Kong and overseas investor who holds a local currency other than RMB will be
exposed to currency risk if he/she invests in a RMB product due to the need for
the conversion of the local currency into RMB. During the conversion, you will also
incur currency conversion costs. Even if the price of the RMB asset remains the
same when you purchase it and when you redeem / sell it, you will still incur a
loss when you convert the redemption / sale proceeds into local currency if RMB
has depreciated.
Source: Investor Education Centre, HKEx.