#1Shanghai-Hong Kong Stock Connect 2015.01.07 中銀香港(控股)有限公司 BOC HONG KONG (HOLDINGS) LIMITED#2The launch of Stock Connect further expands the cross- border RMB investment channel Shanghai-Hong Kong Stock Connect officially launched on 17 Nov 2014, enabling investors in their respective markets to trade designated equity securities listed in the other's market through local securities firms or brokers Northbound Trading RMB / other currencies RMB Banks Brokers in HK HKE Stock Exchange of Hong Kong RMB Shanghai Stock Exchange •Hong Kong investors • Overseas investors Southbound Trading RMB Investment quota : • Aggregate quota: RMB300bn • Daily quota: RMB13bn Eligible securities: . Constituent stocks of SSE 180 Index & SSE 380 Index • A+H shares . Mainland China investors • Institutional investors RMB HKD Securities firms in Mainland China Shanghai Stock Exchange Stock HKE • Individual investors . (Holding a balance of not less than RMB 500,000 in their securities & cash accounts) ● 中國銀行(香港) BANK OF CHINA (HONG KONG) Investment quota : Aggregate quota: RMB250bn Daily quota: RMB10.5bn Source HKEX Exchange of Hong Kong Eligible securities: • Constituent stocks of the Hang Seng Composite LargeCap Index & Hang Seng Composite MidCap Index, • A+H shares 2#3Key features of SH-HK Stock Connect Index Constituents Dual-listed Stocks Northbound Trading ⚫ SSE180 ⚫ SSE380 Southbound Trading • Hang Seng Composite LargeCap Index Hang Seng Composite MidCap Index A+H shares both listed on SEHK and SSE A+H shares both listed on SEHK and SSE • Shares on risk alert board Excluding Eligible Securities • Shares not traded in RMB Total number 568 Market cap 90% (% of all shares) Stocks not traded in HKD •H shares which have corresponding shares listed and traded on an exchange in Mainland China other than SSE; •H shares which have corresponding A shares put under "risk alert" 266 82% Eligible Investors Average daily turnover (% of all shares) Institutional Individual 80% All HK and overseas investors All HK and overseas investors Investment Quota Aggregate quota Daily quota RMB300 billion RMB13 billion 78% All Mainland institutional investors Eligible Mainland individual investors (Holding a balance of not less than RMB 500,000 in their securities & cash accounts) RMB250 billion RMB10.5 billion#4Comparing Stock Connect with QFII/QDII / RQFII Stock Connect Business entity Stock exchange of HK and SH Investment direction Both directions Currency RMB Quota First-come, first-served Equal opportunities QFII/QDII / RQFII Financial institutions such as banks, asset management companies etc. Single direction Lock up period Cross-border fund management Choice of investment No restrictions Funds must return to origin after selling the shares Direct investment: Free to choose stocks for investment HKD/USD/RMB Depends on allocation of quota to each institutions QFII: 3-month, RQFII: 1-year Subject to exchange rate risk and may increase cost Funds can stay in the local markets for trading Indirect investment: Investment decisions are made by the licensed institutions 4#5Stock Connect has begun on a more subdued note 14000 12000 10000 8000 6000 4000 2000 0 Daily Trading Volume of Shanghai-Hong Kong Stock Connect (RMB million) Southbound Trading Aggregate Net Buy Volume (RHS) -Southbound Trading Daily Net Buy Volume (LHS) Northbound Trading Aggregate Net Buy Volume (RHS) Northbound Trading Daily Net Buy Volume (LHS) 2014.11.18 2014.11.17 2014.11.19 2014.11.21 2014.11.20 2014.11.24 2014.11.26 2014.11.25 2014.11.27 2014.11.28 2014.12.1 2014.12.2 2014.12.3 2014.12.4 2014.12.5 2014.12.8 2014.12.9 2014.12.10 2014.12.11 2014.12.12 2014.12.15 2014.12.16 2014.12.17 2014.12.18 2014.12.19 2014.12.22 2014.12.23 80000 70000 60000 50000 40000 30000 20000 10000 0 The turnover may remain low in the next few months. However, the performance and value of Stock Connect should not be judged only on short-term activities ● 中国銀行(香港) BANK OF CHINA (HONG KONG) 5#6Stock Connect is a significant mechanism innovation Innovative Closed-loop investment framework Not required to open account in the other's market 港股通 Direct cross-border funds transfer 滬股通 (投資上海股票) 「投資範圍:上證180指數、 上證380指數成分股、上海證 券交易所上市的A+H股公 司投票 「限額:總額3,000億元人 民幣,每日130億元人 |民幣 【投資門檻:不設門檻 流程:香港投资者 委託香港經紀商, 向上交所進行中 ●報(買賣盤傳) (章),買賣指 定上海股 (投資港股 投資範圍: 恒生綜合大型 股指數、恒生 「綜合中型股指數 「成分股、同時在港 「交所及上交所上市 的A+H股公司股票 限額:總額2,500億元 「人民幣,每日105億元 人民幣 「投資門檻:僅限機構投資 者及證券帳戶及資金帳戶 餘額合計不低於50萬元人 民幣的個人投資者 喜流程:內地投資 或者委託內地證券 「公司·向港交 所進行申報 (買賣盤傳 遞),買賣 指定港股 No worries on Foreign Exchange Controls Removal of restrictions on RMB Conversion Limit ✓ Clearing and settlement to be conducted through linkage established between China Clear and HKSCC Both clearing houses will setup omnibus stock accounts with each other for the purpose of holding securities and funds settlement Lower Trading Costs and Saving Time Both markets will maintain own trading rules and investors can continue to use the existing stocks accounts, agents and settlement services 6#7Stimulate demand for different types of products and business opportunities in the market 1 Demand for Products 2 Emerging Opportunities Demand for Foreign Exchange Offshore CNH Derivatives Trading and Product Innovation 3 Vibrant Market Activities Offshore RMB Capital Market Demand for Risk Hedging Margin Financing and Securities Lending Services Demand for Structural Products Increased cross- border RMB Fund Flows Channel Active Offshore RMB Interbank-Lending Stimulate Cross-border Demand of Onshore and Offshore Investors Corporate Listings, Investment & Financing of RMB "Dual Tranche, Dual Counter" Further Expansion of RMB Capital Pool in Hong Kong Offshore RMB CNH Market Onshore and Offshore Asset Management Business Offshore RMB Lending Market 7#8Profound influence to opening-up of Capital A/C in future Next Step? A significant step in the opening-up of Mainland's capital market ● Will cause a series of far-reaching impact to both the onshore and offshore RMB market A good model for the future opening-up of China's capital account SH-HK Stock Connect ⑥ 中国银行(香港) BANK OF CHINA (HONG KONG) M Mutual Recognition of Funds Shenzhen - HK Stock Connect RQDII Commodities Connect Bonds Connect 8#9New development opportunities brought by RMB internationalization Qianhai Shenzhen- Hong Kong Modern Service Industry Cooperation Zone Cross-border RMB Lending 11 Guidelines in Supporting Growth in Foreign Trade Accelerated Progress of RMB Internationalization Policy for SH-HK Stock Connect PBOC circular No. 168 on simplification of RMB cross- border business processes Cross-border RMB Cash Pooling Cross-border RMB Financial Policy for Shanghai Free Trade Zone, and the newly established FTZS Retail Business Cross-border RMB Intra-group Transactions ⑥ 中国银行(香港) BANK OF CHINA (HONG KONG) 9#10Outlook ― Virtuous cycle of offshore RMB circulation Rapid development of Cross-border RMB trade settlement, investment and financing Continuous development of the offshore RMB capital pool 1 The Pace of RMB Internationalization Continued to Accelerate Enriched RMB wealth management products and improved RMB asset management business Increased activities in RMB bonds, lending business and other financing activities ⑥ 中国銀行(香港) BANK OF CHINA (HONG KONG) 10#11Disclaimer Products and services described in this presentation and any associated material (collectively, the "Materials") provided by Bank of China (Hong Kong) Limited, its subsidiaries, affiliates or group companies (collectively, "BOCHK Group"), may not be suitable for persons in all jurisdictions. The information contained in the Materials is for your general reference only and is provided without warranty of any kind and may be changed at any time without prior notice. Persons in receipt of the Materials should consult their own professional advisers before making any investment decision to purchase any securities or financial products. It is not possible for the Materials to disclose all risks and significant aspects associated with the products and services described herein. No person should deal in any such securities or financial products or avail themselves to BOCHK Group's investment services unless he understands the nature of the relevant transactions and the extent of his exposure to potential loss. Each prospective investor should consider carefully whether the products and investments are suitable for him in light of his circumstances and financial position. None of the Materials constitutes an offer of any securities for sale or solicitation of an offer to sell any securities in the United States or any other jurisdiction in which such offer or sale is prohibited. The financial products and services referred to in the Materials, have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and no such securities may be offered or sold in the United States unless registered under the Securities Act or pursuant to an exemption from such registration. The products may not be at any time offered, sold, transferred, delivered, exchanged, exercised or redeemed within the United States or to, or for the account or benefit of, any U.S. person (as defined in the Securities Act or the U.S. Internal Revenue Code of 1986, as amended). No invitation is made in the Materials or the information contained herein to enter into, or offer to enter into, any agreement to purchase, acquire, dispose of, subscribe for any securities, and no offer is made of any shares in or debentures of a company for purchase or subscription, except as permitted under the laws of Hong Kong. You should note that information in the Materials is reflective of data as of the specified date and is based on current assumptions and market conditions. All estimates and opinions, if any, included in the Materials may be subject to change without notice and past performance is not indicative of future results. Although information in the Materials has been prepared in good faith from sources believed to be reliable, BOCHK Group does not represent or warrant its accuracy, truthfulness and completeness. None of BOCHK Group or its representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever arising from any use of the Materials or its contents or otherwise arising in connection with the Materials. To the extent that the financial products described in the Materials are listed in Hong Kong, they are neither endorsed, issued, sold nor promoted by The Stock Exchange of Hong Kong Limited. The Stock Exchange of Hong Kong Limited expressly disclaims any liability for any loss howsoever arising from or in reliance upon the whole or any part of the contents of the Materials. ⑥ 中国銀行(香港) BANK OF CHINA (HONG KONG) 11#12Disclaimer From time to time, and in the ordinary course of business, members of the BOCHK Group may provide advisory and investment or commercial banking services, and enter into other commercial transactions related to products described in the Materials, for which customary compensation has been received. Prospective investors should make enquiries with their respective brokers as to the terms and/or existence of any such commission arrangements. For example, at any time, member(s) of the BOCHK Group may act as a distributor or market-maker or otherwise be long or short of or have financial interests in services/products described in the Materials. In making an investment decision or availing yourself of the services described in the Materials, you are deemed to represent that you have made your investment and trading decisions (including decisions with regard to the suitability of the products) based upon your own judgment and not in reliance upon any view expressed by us and that you fully understand all the risks involved and are capable of assuming and willing to assume such risks. BOCHK Group does not make any representation regarding the legality of investments described in the Materials under any applicable laws. The Materials are protected by copyright. No part of it may be modified, reproduced, transmitted and distributed in any form for use without BOCHK Group's prior written consent. If the presentation materials fall within the definition of "investment research" under Paragraph 16.2 (f) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, we shall make disclosure in the form set out in "Disclosure for Research Report and Presentation". "Investment research" includes documentation containing any one of the following:- (i) result of investment analysis of securities; (ii) investment analysis of factors likely to influence the future performance of securities, not including any analysis on macro economic or strategic issue; or (iii) advice or recommendation based on any of the foregoing result or investment analysis. ⑥ 中国银行(香港) BANK OF CHINA (HONG KONG) 12#13Thank you Investor Relations Contact : E-mail: [email protected] Website: www.bochk.com 中銀香港(控股)有限公司 BOC HONG KONG (HOLDINGS) LIMITED