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Citi enable regulated offshore funds to access Stock Connect A-shares

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Citi’s depositary bank business is enabling European-registered alternative investment funds (AIF) and UCITS funds to trade A-shares through the Shanghai-Hong Kong Stock Connect scheme. 

Since the launch of Stock Connect in November last year, Citi has worked very closely with key regulators, exchanges, leading law firms and industry associations in Hong Kong and across EMEA to clarify and strengthen the legal and regulatory structure of Stock Connect for the required due diligence to allow AIF and UCITS funds to invest A-shares through Stock Connect. In addition, Citi was first to develop the Model C solution which is uniquely designed to overcome key challenges for these regulated funds to trade A-shares through Stock Connect, ensuring proper segregation of fund assets and allows the assets to remain with a qualified custodian by eliminating the need for pre-delivery of shares to the local broker. Model C also enables these funds to settle A-shares via RVP/DVP (Receive Vs Payment / Delivery Vs Payment) method to avoid counterparty risk with local brokers. To access Stock Connect, fund managers will need to comply with Citi’s standard terms and conditions, and have completed their due diligence on the suitability of investing through Stock Connect for the relevant fund 
 
“We are most excited to see the regulators and exchanges in Mainland China and Hong Kong working together and overcoming many challenges to launch Stock Connect in such a short period of time,” says Cindy Chen, Hong Kong Head of Securities Services, Citi.  “We are pleased to announce today that Citi is now ready to enable international investors to access Stock Connect by providing a solution that allows them to comply with the regulatory regime of their domicile countries and to transact in a safe and efficient way.”

“Citi is pleased to support the development of the A-share market and the internationalisation of the RMB,” says Paulus Mok, Head of Markets for Greater China, Citi. “Enabling offshore funds to transact A-shares through Stock Connect will help improve A-share market fundamentals and efficiency by bringing in more diversified, stable and high quality long term institutional investors.”
 
Citi is one of the world’s largest global custodians with about USD15 trillion in assets under custody and the industry’s largest proprietary network staffed with local expertise in each market. The global reach and the unrivalled scale of the local network enable institutional investors globally to better access local market expertise and opportunities.

Citi was designated by The Hong Kong Monetary Authority (HKMA) as one of the Primary Liquidity Providers for the offshore RMB market in Hong Kong in November 2014. The designation will allow Citi access to a dedicated repo facility of RMB2 billion provided by the HKMA, to promote offshore Renminbi liquidity and facilitate Renminbi transactions for corporate customers and other financial institutions. This will help expand the offshore Renminbi market, bring new business opportunities to Hong Kong, and further strengthen Hong Kong’s role as the premier offshore Renminbi centre.
 

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