Citi’s depository bank business can now offer A-Share trading through the Shanghai-Hong Kong Stock Connect scheme for alternative investment funds and UCITS funds that are registered in Europe.
Since the launch of Stock Connect in November, Citi has worked with regulators, exchanges, law firms and associations in Hong Kong and the Europe, Middle East and Asia region, conducting due diligence to clarify and strengthen the legal and regulatory structure of the scheme.
Citi has also become the first to develop a Model C solution to overcome some of the challenges of trading A-Shares through Stock Connect. The model is designed to segregate fund assets and to allow some assets to remain with a custodian, by removing the need for pre-delivery of shares to a local broker.
It also allows funds to settle A shares via the receive-versus-payment and delivery-versus-payment methods, avoiding counterparty risk with local brokers.
Cindy Chen, Citi’s head of securities services in Hong Kong, said: “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.”
“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.”
Paulus Mok, head of markets for Greater China at Citi, added: “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.”
To access Stock Connect through Citi, fund managers will be obliged to carry out their own due diligence on suitability, and also to comply with Citi’s terms and conditions.
In November 2014, Citi was also designated one of the primary liquidity providers for the offshore RMB market by the Hong Kong Monetary Authority.
