Hang Seng Indexes and China Securities Index (CSI) have entered the Shanghai - Hong Kong Stock Connect space with the launch of a joint index which will be released on November 17.

The new Hang Seng CSI Shanghai-Hong Kong AH Smart Index (SHHKSI) will capture the performance of 50 dual listed company stocks in both Shanghai and Hong Kong stock exchanges that are eligible for investment under the Stock Connect scheme, and is aimed at providing a benchmark reflecting a price arbitrage strategy that may bring additional returns to investors while the AH price difference is expected to be narrowed after the launch of the SH-HK Stock Connect.

“The price differential between A shares and H shares is expected to narrow after the launch of Shanghai-Hong Kong Stock Connect as cross-border arbitrage activities become easier, and our new index will serve as a benchmark to reflect the arbitrage opportunities which may bring additional return to investors,” said Vincent Kwan, director and general manager of Hang Seng Indexes.

According to Kwan, the introduction of the Shanghai-Hong Kong Stock Connect will result in an increasing demand for cross-market products and that the new index is expected to be used as an underlying for derivative-based products including structured investment solutions.

The CNY-denominated index will include the share class that has a lower relative price and will be calculated and disseminated in real time at two-second intervals starting from November 17.

A spokesperson at Hang Seng Indexes told SRP that the new gauge includes only stocks that fall under the Shanghai-Hong Kong Stock Connect, while other indices such as the Hang Seng China AH Index Series launched in 2007 and the Hang Seng China AH Smart Index released last year, also include stocks listed in the Shenzhen Stock Exchange.

The announcement follows yesterday’s move by regulators in Hong Kong and China to announce the introduction of the Shanghai-Hong Kong Stock Connect this month.

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