April 11, 2018 / 3:01 AM / in 2 months

UPDATE 1-China to sharply boost daily stock connect quotas from May 1

SHANGHAI, April 11 (Reuters) - China’s securities regulator said on Wednesday that it would quadruple daily quotas for stock connect schemes linking mainland and Hong Kong markets, a day after Chinese President Xi Jinping pledged to open the economy further to foreign investors.

The daily northbound quotas under the Shanghai and Shenzhen stock connect schemes will be boosted to 52 billion yuan ($8.27 billion) each, the China Securities Regulatory Commission (CSRC) said in a statement on its website, up from 13 billion yuan at present.

Daily southbound quotas under the schemes will be adjusted to 42 billion yuan each, up from 10.5 billion at present. The move was widely expected by the industry. In late March, the CEO of the Asia Securities Industry & Financial Markets Association (ASIFMA) said he expected to see quotas relaxed ahead of China’s imminent MSCI inclusion. Market reaction to the announcement was muted, as only a small fraction of daily quotas are being used by investors under the current cap. A modest 5.6 percent of the southbound Shanghai-Hong Kong connect had been used by 0255 GMT Wednesday.

The Shanghai Composite Index was up 0.6 percent Wednesday morning, and the Hang Seng Index was 0.4 percent higher. Separately, the CSRC said on Wednesday that it would “strive” to launch a Shanghai-London stock connect scheme in 2018 in cooperation with British counterparts. On Tuesday, Xi promised to open the country’s economy further and lower import tariffs on products including cars. The comments come amid a tense trade standoff between Beijing and Washington, and as foreign businesses have continued to clamour for broader reforms and opening of markets. In June and September, global index publisher MSCI will add around 230 large-cap Chinese stocks into its EM index. The index weighting will be small but some expect money flows from Hong Kong into China via the stock connect scheme on those days may breach the daily quota. ($1 = 6.2840 Chinese yuan) (Reporting by Samuel Shen, John Ruwitch and Andrew Galbraith Editing by Shri Navaratnam)

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