Guotai Junan International Yan Feng: Suggest gradually lowering the qualifying investor access threshold for Hong Kong Stock Connect in a timely manner

In recent years, global geopolitical tensions have persisted, and the economic and financial landscape has undergone rapid changes. The relative decline in the attractiveness of U.S. dollar assets has become a market consensus, prompting global capital to seek new “safe havens.” Chinese assets, supported by China’s strong economic resilience and breakthroughs in new productive forces, have become a compelling option for rebalancing global capital.

In this context, Yan Feng, member of the National Committee of the Chinese People’s Political Consultative Conference and Chairman of Guotai Junan International Holdings Limited, stated that under these circumstances, promoting rapid development of the capital market and maintaining market stability should be two key priorities. He suggested seizing the opportunity of global governance reform, capitalizing on “Investing in China” and “Chinese Investment” opportunities, deepening connectivity between the mainland and Hong Kong markets, and promoting stability through openness, development, and reform.

Yan Feng believes that leveraging Hong Kong’s unique advantages is crucial for achieving these goals. A more vibrant and stable Hong Kong market will significantly enhance international investors’ confidence and willingness to allocate Chinese assets through connectivity channels, thereby forming a new pattern of mutual support and mutual promotion between the two regions, with both domestic and international markets developing in a mutually beneficial and steady manner.

Looking ahead to 2025, the supportive role of Hong Kong stocks for A-shares has become increasingly evident. Hong Kong stocks saw cumulative increases of 27.8% for the Hang Seng Index and 23.5% for the Hang Seng Tech Index. The IPO market raised a total of HKD 285.8 billion, returning to the top position globally. Trading activity in the secondary market was lively, with daily average turnover reaching HKD 249.8 billion, an 89.5% year-on-year increase. Leading Chinese-funded securities firms in Hong Kong experienced significant growth, with core business revenues strongly improving. Meanwhile, on the A-share side, the Shanghai Composite and ChiNext 50 indices rose by 18.4% and 35.9% respectively, with total market capitalization surpassing 100 trillion yuan. The daily average turnover of the two markets reached 17 trillion yuan, a 61.9% increase year-on-year. The new dual development pattern of Hong Kong and A-shares is beginning to take shape.

Therefore, it is essential to continue consolidating this positive momentum, further exploring the potential for coordinated development between the two markets, optimizing relevant mechanisms, and enhancing their capacity and attractiveness to absorb international liquidity. Facilitating bidirectional flow of incremental funds between the north and south will support mutual development and stability of both stock markets.

To this end, Yan Feng proposed four specific recommendations:

1. Leverage “Chinese Investment” to strengthen the market foundation. He suggested timely, phased reductions in the eligibility thresholds for the Hong Kong Stock Connect, ensuring the closed-loop operation of funds and compliance with foreign exchange controls, and expanding the QDII (Qualified Domestic Institutional Investor) and RQDII (Renminbi Qualified Domestic Institutional Investor) mechanisms to individual investors. This can amplify the influence of “Chinese Investment,” alleviate the premium and discount issues between A-shares and H-shares, boost market valuations, promote household savings to shift into investments, and increase residents’ property income, thereby releasing domestic demand potential.

2. Highlight the theme of “Investing in China” to attract global capital. Under controlled risk conditions, improve the convenience for foreign investors to participate in the mainland market, and better align trading rules and risk hedging mechanisms with international standards. Strengthen and further promote the inclusion of Chinese assets in major international indices such as MSCI and FTSE Russell. Actively tell China’s story to enhance the international market’s understanding of China’s economic prospects and investment opportunities.

3. Deepen reforms of the market maker system to improve market liquidity and efficiency. Address issues such as insufficient market-making functions in the mainland and lack of liquidity in small- and mid-cap Hong Kong stocks by systematically optimizing the Shanghai and Shenzhen market-making mechanisms, and exploring the introduction of a market maker system in Hong Kong stocks. This will enhance liquidity support, stabilize market valuations and expectations, and have positive implications for restoring stock market wealth effects, stabilizing consumption, and stabilizing the economy.

4. Improve risk prevention and control systems to prevent systemic risks. Continue strengthening monitoring and prevention of high-risk areas such as on- and off-market leverage, algorithmic trading, high-frequency trading, and cross-border arbitrage. Increase oversight of illegal private placements and disguised leverage to ensure market leverage remains within safe limits. Establish quantitative trading circuit breakers to prevent market irrationality caused by algorithmic resonance. Suppress excessive speculation and capital idle circulation to prevent the capital market from deviating from economic fundamentals and losing order.

(Source: Securities Times)