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“Belt and Road” investment opportunities offered by Stock Connect companies

By Chief China Economist’s Office, Hong Kong Exchanges and Clearing Limited

Summary

The Belt and Road Initiative (BRI) was initiated by the Chinese President Xi Jinping in 2013, with the visions and action plan released in 2015. The BRI is expected to help promote the economic prosperity of the countries along the Belt and Road (B&R) (referred to as the B&R countries) and regional economic cooperation, strengthen exchanges and mutual learning between different civilisations, and promote world peace and development. More than 100 countries are involved in the BRI, with over 60 B&R countries, through various forms of cooperation. Over the five years after the announcement of the BRI, significant progress has been achieved in respect of economic and trade cooperation, investments and services.

The BRI has opened up abundant business opportunities and possibly high potential return on investments along the B&R countries to worldwide enterprises across all industry sectors. For providing insights on investment opportunities to capital market participants, the China Exchanges Services Company Ltd (CESC) conducted its B&R Survey to reveal the trend of B&R business participation by listed companies in the Mainland and Hong Kong. The Survey revealed that (1) there has been continuous increase in B&R participation and growth in B&R businesses of the listed companies; (2) participation has been increasingly active particularly in engineering contracts and insurance businesses; (3) Mainland companies have assumed dominance in non-financial businesses and have a growing share in financial businesses; (4) participation by companies in B&R businesses have become more diverse across industry sectors; and (5) the geographical distribution of B&R businesses have also become increasingly diverse.

A number of B&R indices have been developed to track these B&R opportunities. In particular, the CES Belt and Road Index is the first and only Mainland-Hong Kong cross-border benchmark for B&R investment, with index constituents being listed stocks tradable through the Mainland-Hong Kong Mutual Market Access pilot programme, i.e. the Stock Connect schemes. Investment tools such as exchange traded funds could be developed based on the index to facilitate investors to reap the B&R investment opportunities across the border.

 

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