Change Brought by Shanghai-Hong Kong Stock Connect to Hong Kong

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Topic:

To find out the level of the change brought by Shanghai-Hong Kong Stock Connect to the Hong Kong economic.

Aims and objectives:

The reason of I choosing this topic is because the Shanghai-Hong Kong Stock Connect is a new tool between Hong Kong and China. It will going to change the Hong Kong and China economic. As a citizen the Shanghai-Hong Kong Stock Connect related to our life in many different way when is effect our economic. Also, the Shanghai-Hong Kong Stock Connect is a new policy that are not much people understand how is work. So that I want to learn more knowledge about the Shanghai-Hong Kong Stock Connect. That's why I am interested in researching this topic

Rationale for selection:

The Shanghai-Hong Kong Stock Connect is a new investment channel between Hong Kong stock exchange and Shang Hai stock exchange market. The Shanghai-Hong Kong Stock Connect started in 2014,11,17. The first day of the opening day. The Hang Seng index is full down about 12%. The daily limited from Hong Kong buy in Shanghai stock exchange as know as northbound trading used all 170 hundred million before 2p.m. On the other hand the Shang Hai stock exchange through the Hong Kong stock market as know as southbound trading is only used 17%. I collect the two month Shanghai-Hong Kong Stock Connect finance data from wiki and Hkex. The Shanghai-Hong Kong Stock Connect is a new tool of the investor between china and Hong Kong. My rationale is to find out whatever Shanghai-Hong Kong Stock Connect benefits Hong Kong or PRC and the level of change that may occur for Hong Kong investors.

Methodology:

The methodology for data collection is based on the variety of different articles , journals, wed site, finance report, news, special column and interview meeting. I will going to collect primary data and secondly data to find out the level of the change brought by Shanghai-Hong Kong Stock Connect g to the Hong Kong economic.

In the secondly data, I want to find out the information about the background information of the Shanghai-Hong Kong Stock Connect like how the process work and when is the Shanghai-Hong Kong Stock Connect started. After that, I collect the data from articles from Zhiwu Chen a professor of Finance at Yale School of management which about how he feel about Shanghai-Hong Kong Stock Connect and how is that going to effect the Hong Kong and China economic. Also I find the finance data record on HkEx which include two month data of Shanghai-Hong Kong Stock Connect. Furthermore, I read the some special column about how the writer analysis how did the Shanghai-Hong Kong Stock Connect doing after is started few months. The secondly data are easy, fast and provided many data for my topic. Also most of the data is accurate and come from the people with the Shanghai-Hong Kong Stock Connect and economic knowledge.

In the primary data, I create a interview to collect the opinion from the investor who got more than 8 years invest experiences. I use interview to collect the data I need is because I can get the first hand information and the information I need exactly. I can create the own question in the interview, also ask the people with the economic knowledge. It is better than asking the people totally do not understand what is Shanghai-Hong Kong stock connect.

literature review:

According to Zhiwu Chen a professor of Finance at Yale School of management. The Shanghai-Hong Kong Stock Connect is obvious advantage to Hong Kong economic. The Shanghai Stock Exchange and Hong Kong Stock exchange link together will improve the Hong Kong union and the financial centre status of the country . To keeping the Hong Kong union value, The main point is to keep Hong Kong international view and International orientation. That mean can't be too Mainland Hong Kong .

According the new of Sing Tao Drily, Since the Shanghai-Hong Kong Stock Connect started 11,17,2014. The money flow into A-share market through northbound trading is 1006.18 billion(Renminbi). and the funds through southbound trading in Hong Kong stock market is only 239 billion.

According to special column of yicai, the reason of southbound trading keep Stillness is because of the southbound trading need the mainland investor got 50 million cash in the investor account. On the other hand the northbound trading do not got any condition to the investor. The investors who got more than 50 million cash flow and interest in Hong Kong stock market is already using other tool to investing in Hong Kong. The policy of the limited of 50million cash flow is block the asset smaller investor outside to the Hong Kong market.

According to the Charles Li the CEO of Hong Kong Stock Exchange and clearing Limited, the reason of the southbound trading is not popular is because of four main reason: AH share do not got arbitrage opportunity, many invest organise are still waiting the clear view, the mainland investors are more interest in penny stock and not familiar with the Hong Kong stock.

According to Chen Fuxin the CTO of Deloitte , Government financial year of 2014/15 last four month of surplus is expert of 48 billion competitive with last year it have been increase 25 billion. Most of increase are from the stamp duty grow. He explain that, since the Shanghai-Hong Kong Stock Connect started the turnover of Hong Kong stock market is increase, so that the add up 6 to 8 billion income per month.

The critique of references:

The reason of the secondly data is from professor, new, special column, CEO and CTO is because I collect the data basic on the information come from the people or the media with the economic knowledge and understanding Shanghai-Hong Kong Stock Connect policy. The information I collect in secondly data is help me develop the hypothesis and also make the reader understand more about how the level of the change brought by Shanghai-Hong Kong Stock Connect to the Hong Kong economic.

Most of the secondly data is from the internet it is fast and free to get the information on internet. But it is hard to find out what kind of data is useful because there are so many false and outdate data on internet.

The reason of the primary resource using the interview question is because I can design my own question to collect the data. So that, the source of the answer can be credible and exactly what I needed. The information I find out in the interview is very useful and is show how do the interviewer feel about Shanghai-Hong Kong stock connect.

Action plan:

Start date

End date

Milestone

Giving the assignment and brainstorming on topics

18-12-14

â-Ž

Searching topic

19-12-14

23-12-14

Confirm the topic

24-12-14

â-Ž

Secondly Data collection

27-12-14

06-01-14

Secondly Data analysis

08 -01-15

11-01-15

select the information that useful

13-01-15

16-01-15

Design the hypothesis

17-01-15

20-01-15

â-Ž

Research design

22-01-15

25-01-15

Collect the finance data

27-01-15

Design the Interview question

28-01-15

30-01-15

Interview

05-02-15

â-Ž

Analysis data

07-02-15

09-02-15

Summary

10-02-15

â-Ž

Hypothesis:

The definition of hypothesis is ''A hypothesis can be defined as a tentative explanation of the research problem, a possible outcome of the research, or a n educated guess about the research outcome.” Sarandakos 1993:1991

From the literature I read, I suggest that the Shanghai-Hong Kong Stock Connect is has more disadvantage more than advantage to the Hong Kong economic.

My aim and objectives is to test my hypothesis to find out is that true the Shanghai-Hong Kong stock connect is bring more damage than benefit to the Hong Kong economic.

The skills and knowledge to gained the hypothesis will need the economic knowledge and enough stock market experience.

Term of reference:

the Shanghai-Hong Kong Stock Connect is a new policy there you can buy in Shanghai stock in Hong Kong, also the mainland people can buy in Hong Kong stock.

The northbound trading is a path that the mainland investors buy in Hong Kong stock. It is inside the Shanghai-Hong Kong Stock Connect.

The southbound trading is a path the Hong Kong investor buy in shanghai stock market.

Duration:

I spent 4 days to design the hypothesis. 3days to design the interview question. the interview is fast only take few minute but in here i will i spent 1 day. so totally 8 days.

Ethical issues:

All the interview information are only keep for this research, Also after the report is finish the data will not going to keep longer than is necessary.

Research design:

I use a interview to collect the data and test my hypothesis which mean is a qualitative research and using graph to compare a few months northbound trading and southbound trading finance record to test my hypothesis which is quantitative research. My interviewer will be a face to face meeting and I will choose a quiet place to do the meeting such as Study room in library. Also the interviewer will have the enough experience or enough knowledge to answer my question. My interviewer is a investor got more than 8 years invest experiences. Before the interview start I will prepare and print out the interview question just in case I forget the question. Also, I will get a page to write down the answer from the interviewer. then, I will collect the basic person information from my interviewer and explain that all the information I collect is only use in the research project. The interview I expert of 10-15min so that I will create the interview question short and exactly the information I need because I am afraid that the interviewer will lost patient in the meeting if the interview is too long. The interview will operate in Cantonese, this is our first language, so that to less the misunderstanding.

Also, I want to statistical analysis the Shanghai-Hong Kong Stock Connect finance record in this two month, so that I can have a clearly picture of what happen in Shanghai-Hong Kong Stock Connect. The finance record is realistic to prove my hypothesis.

Interview:

1Q: Can you tell me a several change brought by the Shanghai-Hong Kong stock connect to the Hong Kong stock market?

A: At first, the cash flow in the Hong Kong stock market had been decrease because many investor are interest in Shanghai stock market. Secondly, it bring some foreign investor and foundation interest in Hong Kong and Shanghai stock market. Thirdly, There are more option to the Hong Kong investor. Fourthly, Before is started this policy main point is want to draw the cash flow from mainland market to Hong Kong stock market. So that, the good new increase Hang seng index a week.

2Q:Do you like the Shanghai-Hong Kong Stock Connect policy? why?

A:No, I don't like the policy. Because this policy didn't bring any visible and positive benefit to me. I am not interest in Shanghai stock market. My focus in Hong Kong stock market.

3Q:Can you tell me some advantage of the Shanghai-Hong Kong stock connect bring to the Hong Kong economic?

A: It draw some foreign investor and company to develop in Hong Kong, that mean some employee. Also, for the long term is increase the link between Hong Kong and China economic. Furthermore it increase the international status of Hong Kong too. Then, it bring some income to the Government from the tax.

4Q:Can you tell me some disadvantage of Shanghai-Hong Kong stock connect bring to the Hong Kong economic?

A: The Shanghai-Hong Kong stock connect didn't bring much cash flow in to Hong Kong stock market. At first, this policy is want to attract the mainland investor in to Hong Kong stock market, but it is totally different when is started. As if the situation do not change the Hong Kong stock market will keep flowing cash flow to mainland . Also, the policy increase the Shanghai economic status in international too. That will make a challenge to the Hong Kong status as a financial center.

5Q:The Shanghai-Hong Kong stock connect is bring more benefit to China economic or Hong Kong economic?

A: I will say that mainland is getting more benefit than Hong Kong. As a long term it increase the contact between mainland and international economic. As a short term it increase the investor in Shanghai stock market.

Data collection and analysis:

The problem of the interview show that there are some problem of my interviewer which is personally do not like the policy of the Shanghai-Hong Kong Stock because he is more interest in Hong Kong stock market. It might lead some bias opinion of this policy. Also, when the face to face meeting, it is hard to writing down the answer in detail and make the meeting going smoothly so that I only got time to write down the main point of the answer.

Then I collect the finance recode from HKEx, It is reliability because it is a official information that cannot be false .

This graph show that how the northbound trading total Buy Trade Value in the Shanghai-Hong Kong stock connect from started in Nov to Fed. As the graph show the trends of the northbound trading totally buy in is decreasing in last two month. So that i forecast that the next few months the totally buy in will keep decrease.

This graph show that how the southbound trading total Buy Trade Value in the Shanghai-Hong Kong stock connect from started in Nov to Fed. The southbound trading is increasing . But still can't compare with northbound. The higher totally buy in southbound is 23,260.55million. The Northbound higher buy in is 74,469.42 million.

This graph show that southbound trading is only 15% and northbound trading are 85%. That mean the Hong Kong stock exchange market are flow the funds in to the mainland stock market.

this is the graph show how is the Shanghai-Hong Kong Stock Connect doing in January. As you can see the southbound trading is 24% is compare with last month is got a 9% increase. On the other hand the northbound trading is dropped. Even the southbound trading is increase the cash transfer is still no close to balance. According this two month record, I suggest that the southbound trading is not going to increase more than northbound trading or even balance. The cash flow in the Hong Kong market is flowing to mainland market. That prove my hypothesis the Shanghai-Hong Kong stock connect is bring a damage of the Hong Kong stock market and economic.

Data interpretation:

According of the interview and the finance record, the Shanghai-Hong Kong stock connect is making damage to the Stock market but benefit Hong Kong economic in a long term. This hard to compare the damage and the benefit because some of the benefit is invisible like the internal status and the effect will show in long term but the disadvantage is visible and show in short term such as the damage to the Hong Kong stock market. so that, my hypothesis is can be say is true in a short term but in long term the Shanghai-Hong Kong stock connect will bring more benefit to the Hong Kong economic.

Evaluation of outcomes:

I think my research project plan is half successful in planning. Because my aim and objectives is to understand more about the Shanghai-Hong Kong stock connect and find out a few change bring by this policy. After the data I collect and analysis the aim and objective has been complete. Most of the finding is validity and reliability because is from the people or media have enough knowledge to judge but I got some failure in selecting the data. I focus in the stock market not the overall Hong Kong economic. The secondly data research is easy to collect there are many data on internet .But I have to pick the literature carefully because it is hard to know that is the literature reliability and useful. When I collect the data, some of them a guessing without the prove and not from the people with enough knowledge. So that I have to analysis data to find the information that useful and reliability. The hard part is the hypothesis, because the Shanghai-Hong Kong stock connect is only started two month, There is not enough data and fact to test my hypothesis.

As a conclusion, there are some point I do it wrong but finally the finding is success to meet my aim and objective. But it is hard to tell I got a overview of the change to Hong Kong economic by Shanghai-Hong Kong stock connect .

Future consideration:

In this research, I learn how to do the research project smoothly and how to collect the reliability data. The research result show me more information about the Shanghai-Hong Kong stock connect and fully understand how this invest tool work. So that I have more choose to investing the money.

In the research, I forces on the change of Hong Kong economic, The limitations of the investigation is I did not got enough time and resource to develop more view to see the whole picture of all changing of Shanghai-Hong Kong Stock Connect bring to Hong Kong and mainland economic. Also most of my research is focus in the stock market not the change to whole Hong Kong economic. So that I want to improvement for next time investigation. When I have more time and resource I want to develop the whole picture of t both side economic.

The future of the research area is there are news said that the new investment tool is coming up in next half year, this time is Shenzhen and Hong Kong stock market can buy each other stock. So that, When the new policy start it will going to change a lot of my research. In the future, I want to find out how this two policy effect to the Hong Kong and mainland economic.

Reference:

HKEx shanghai-hong kong stock connect. available on:

http://www.hkex.com.hk/eng/csm/MonthlyStat/M201412e.htm

Prof. Terrill Frantz Discusses Shanghai-Hong Kong Stock Connect at China Briefing. available on:

http://english.phbs.pku.edu.cn/index.php?m=content&c=index&a=show&catid=591&id=682

Sing tao Daily(2015). available on: https://hk.finance.yahoo.com/news/滬港通-流入a股資金過千億人幣-åŒ-熱å-冷未變-013600754.html (Accessed: 11 Fed 2015).

Yicai new(2014): available on:

http://www.yicai.com/news/2014/12/4052878.html(2014-12-16)

AA Stock news. available on:

http://www.aastocks.com/tc/stocks/news/aafn-content/NOW.649369/latest-news

Zhiwu Chen a professor of Finance at Yale School of management:

http://news.takungpao.com/paper/q/2014/1211/2854648.html

Charles, L.(2014) Sing tao Daily, ,available on:

http://la.stgloballink.com/fin/2014/1124/157194.shtml

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