The Financial Supervisory Commission (FSC) has said that it will not allow local retail investors to take advantage of the Shanghai-Hong Kong Stock Connect mechanism to invest in China. However, it will be open to certain institutional and individual investors.
Institutional investors with more than NT$50 million (US$1.66 million) in assets will be allowed to invest through the mechanism. Individual investors with assets of no less than NT$30 million (US$770,000) will also be able to take advantage of the new trading mechanism that will start in October.
The mechanism is scheduled to launch in October. The new equity market connection between the two cities will allow foreign investors to trade in China's A-shares in Hong Kong, and investors in Shanghai will be able to trade Hong Kong shares in China.
FSC Chairman William Tseng said the ban is aimed at preventing further fund outflows from Taiwan, which could impact the local financial market.
“The Shanghai-Hong Kong Stock Connect mechanism will begin operating at the end of October," said Tseng. "We will keep a close eye on its development to see if funds from Taiwan will be drawn by China’s A-shares through Hong Kong. But Taiwan’s capital market actually enjoys higher balance sheet transparency, more seasonable PE ratios, and better fundamentals.”
Tseng said that market conditions will determine whether the FSC will lift the ban on Taiwanese retail investors using the platform in the future.