Shanghai/Shenzhen – Hong Kong Stock Connect Case Study
Following the successful launch of Shanghai – Hong Kong Stock Connect on 17 November 2014, Shenzhen – Hong Kong Stock Connect was officially launched on 5 December 2016. These two connects create path–breaking initiatives that provide international investors with direct access to China's domestic A shares market and paving the way for further opening up of China's capital account and RMB internationalization.
The CMCRC publishes daily market statistics (updated T+5) for impacted security groups through CMCRC's Market Quality Dashboard from 9 December 2016. The following case study uses Market Quality Dashboard to analyse and compare the impact of both the Shanghai – Hong Kong Connect event as well as the Shenzhen – Hong Kong Connect on the three markets (Shanghai, Shenzhen and Hong Kong).
This page displays a subgroup of these metrics for two treatment groups and four control groups participating the Shanghai/Shenzhen – Hong Kong Connect. Group constituents can be found on Connect Information Book (pdf). The left/right half of this page displays the metric results pre– and post– the Shanghai – Hong Kong Stock Connect and the Shenzhen – Hong Kong Stock Connect respectively. Each line on a particular chart represents a time–series of that metric for the chosen security group. Data for multiple security groups can be shown simultaneously. Series data can also be hidden or shown by activating or deactivating the corresponding item in the "Interactive Legend Selector" beneath each chart.
Market quality metrics for the Shanghai–Hong Kong Connect shows that transaction costs improve for connected stocks in both markets as well as intriguing results that the preexisting price premium between cross–listed China A–shares and Hong Kong H–shares, increases post the market design change (refer to Aitken, Ji, Mollica & Wang 2016 for more details). We will provide early assessment for the Shenzhen–Hong Kong connect by mid–January 2017 when there are 6 weeks' worth of data available.
Choose the groups to display in the charts below from this menu:
The tables below give an indication of the change in direction in the score for each group and metric after each stock connect event (Shanghai - Hong Kong Connect on 2014-11-17; Shenzhen - Hong Kong Connect on 2016-12-05).
- An increasing arrow indicates an increasing score. A higher score may be associated with increased market share, or a decreased spread, for example.
- Custom weights can be specified in the text boxes to alter the impact of that metric in the overall score per market and group.
How is the overall score calculated?
Overall score for Shanghai - Hong Kong Connect
The chart below shows the change in overall score for Shanghai - Hong Kong Connect over the entire date range.
Overall score for Shenzhen - Hong Kong Connect
The chart below shows the change in overall score for Shenzhen - Hong Kong Connect over the entire date range.
On-market Trade Count
The daily total on-market trade count for each group.
On-market Trade Volume
The daily total on-market trading volume for each group.
On-market Trade Value
The daily total on-market trading value for each group.
Total Trade Volume
The daily total trading volume (both on and off) for each group.
Total Trade Value
The daily total trading value (both on and off) for each group.
An improved measure of transaction costs, especially for large order trades. We compute the percentage signed difference between the midpoint and the volume-weighted average price (VWAP) of consecutive trades from the same initiator side after a quote, measured in basis points. This metric is value weighted.
The intraday mid-point price return volatility (with configurable grace period).
The difference between each exchange's bid and ask price over the midpoint of the quote measured in basis points. This metric is value weighted.
How much the actual trade price deviates from the mid-point. It represents the actual, round-trip cost of trading to the liquidity demander.
The intra-day autocorrelation of mid-point price return (with configurable grace period).