Investment in China A Shares through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect involves risks. 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 relevant circumstances. The price of securities may move up or down. Losses may be incurred and profits may be made as a result of buying and selling securities.
- Pre-Trade Checking
You must ensure that there are sufficient available shares in your account to cover any proposed sell order under Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect. Otherwise, your sell order may be rejected.
- Settlement
Northbound trades will follow the A share settlement cycle of the relevant Mainland market, where settlement of shares will occur on T day free of payment, and settlement of funds will be effected on T+1 day.
Although the transfer of shares precedes the transfer of cash under Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, title to the shares will not be released until receipt of confirmation of payment (normally on T+1 day). Where the purchase is pre-funded (by way of a debit of cash in your account and a corresponding cash prepayment by the Bank to HKSCC), shares may be released on T day.
- Quota Restrictions
As at November 2016, the Daily Quota (which limits the net value of Northbound buy trades on each trading day) is set at RMB 13 billion for each China A Share market. The Daily Quota may be revised by the PRC authorities from time to time without prior notice.
As a result of the quota restrictions, there is no assurance that a buy order can be successfully placed through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect.
- Restriction on Day Trading
If you buy shares on T day, you may be able to sell only on or after settlement of the buy trade has been completed (normally on T+1 day).
- Disclosure of Interests
If you hold or control 5% or more* of the issued shares of a PRC listed company, you must disclose such interest.
If there is any change in your shareholding of 5% or more*, or if a change results in your shareholding falling below 5%, you also have disclosure obligations.
- Short Swing Profit Rule
If you own 5% or more* of the issued shares of a PRC listed company, you must return to the company any profit made from a sale of shares within six months of the purchase thereof (or vice versa).
* Calculated on an aggregate basis, i.e., across both domestically and overseas issued shares of the PRC listed company, whether the relevant holdings are through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, QFII/RQFII regime or other investment channels
- Foreign Ownership Limits
A single foreign investor's shareholding in a PRC listed company must not exceed 10%. The aggregate of all foreign investors' shareholding in a PRC listed company must not exceed 30%.
The foreign ownership limits may have an adverse effect on the liquidity and performance of an investment in China A Shares. As a result, you may suffer losses through your trading or investment in China A Shares.
- Taxation
You will be fully responsible for all applicable Hong Kong and/or PRC taxes in respect of China A Shares traded or held by you.
The Hongkong and Shanghai Banking Corporation Limited assumes no responsibility for advising on or handling any tax issues, liabilities and/or obligations in connection with Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect. You are strongly advised to consult your own tax advisers with respect to your possible tax consequences of any investment through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect.
- Ownership of China A Shares
HKSCC is the nominee holder of China A Shares traded through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, and Hong Kong and overseas investors as the ultimate investors is recognised under PRC laws and regulations as having beneficial ownership in China A Shares traded through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect. Any beneficial owner who decides to take legal action is responsible for seeking its own independent legal advice to satisfy itself and HKSCC that a cause of action exists and the beneficial owner should be prepared to conduct the action and take up all costs in relation to the action, including providing HKSCC with indemnities and legal representation in proceedings.
- Company Announcements on Corporate Actions
You should note that SSE-listed and SZSE-listed issuers publish corporate documents only in Chinese and English translations will not be available. You will not be able to attend shareholders' meetings by proxy or in person.
- Disclosure of Information
The Stock Exchange of Hong Kong may require The Hongkong and Shanghai Banking Corporation Limited to provide information on your profile and the type and value of your orders and trades placed through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect.
- No Off-Exchange Trading and Transfers
You shall not trade or transfer any shares through any venue other than through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect.
- Risk of Default by China Securities Depository and Clearing Corporation (CSDCC)
If CSDCC defaults, HKSCC may (but shall have no obligation to) take any legal action or court proceeding to seek recovery of the outstanding China A Shares and monies from CSDCC through available legal channels and through CSDCC's liquidation process, if applicable. HKSCC will in turn distribute the China A Shares and/or monies recovered to clearing participants on a pro-rata basis. The Hongkong and Shanghai Banking Corporation Limited in turn will only be distributing the China A Shares and/or monies to the extent recovered directly or indirectly from HKSCC.
As CSDCC does not contribute to the HKSCC Guarantee Fund, the HKSCC Guarantee Fund will not be used to cover any residual loss as a result of closing out any of CSDCC's positions in the event of default by CSDCC.
In the event of default by CSDCC, there is no guarantee that The Hongkong and Shanghai Banking Corporation Limited will be able to fully recover any affected China A Shares and/or monies from CSDCC through HKSCC.
- Risk of Default by Hong Kong Securities Clearing Company Limited (HKSCC)
Any action or inaction of the HKSCC or a failure or delay by the HKSCC in the performance of its obligations may result in a failure of settlement, or the loss, of China A Shares and/or monies. As a result, you may suffer losses.
- Client Error
Quota restrictions (see Paragraph 3 above) and the restriction on off-exchange transfers (see Paragraph 12 above) may affect The Hongkong and Shanghai Banking Corporation Limited's ability to rectify an error trade or otherwise mitigate the consequences of an error trade.
- PRC-related Risks
Investing in the PRC, an emerging market, involves special considerations and risks, including but not limited to greater price volatility, less developed regulatory and legal framework, and economic, social and political instability.
- Renminbi (RMB) Currency Risk
There may be exchange rate risks if you choose to convert RMB payments made on the securities to your home currency.
- ChiNext Shares
ChiNext Shares involve a high investment risk. In particular, profitability and other financial requirements for listing on the ChiNext Board are less stringent than the Main Board and the SME Board of the SZSE. ChiNext Shares may also be very volatile and illiquid. You should make the decision to invest only after due and careful consideration and seek independent professional advice if you are uncertain of or have not understood the nature and risks involved in trading of ChiNext Shares.
This website does not set out all the key risks to Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect. For further information, you should refer to the risk disclosures and other terms set out in the (i) China A Shares Product Fact Sheet [PDF].and China Connect / Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect Terms and Conditions. [PDF]
