Shenzhen Stock Exchange. Photo: AFP
Shenzhen Stock Exchange. Photo: AFP

The cross-border stock trading link between the exchanges in Hong Kong and Shenzhen may be delayed until December because of the Trump effect.

The Hong Kong-Shenzhen Connect had been expected to go live on November 21,  but mainland media reported on Friday that it was likely to be put off until early next month due to concerns of capital flight caused by the continuous depreciation of the yuan.

Since Donald Trump’s election victory on November 9, the yuan has weakened more than 2% in the offshore market, breaking the 6.9 threshold to the US dollar. In the onshore market it has weakened to around 6.89.

This is due to a 5% surge in the strength of the US dollar on the back of expectations that a Trump presidency will result in the revitalization of the US economy and an increase in interest rates, which have also caused a spike in US Treasury yields.

“The mainland has not given the final approval yet [for the Hong Kong-Shenzhen Connect] and the reason is unknown,” one Shenzhen newspaper said. But citing sources close to local regulators, it added that the continuous depreciation of the yuan and fears of capital outflow may have led to the delay.

Because the trading link will allow mainland investors to trade in 417 Hong Kong stocks, it provides a tempting option for buying foreign assets as a hedge against the weakening currency.

The Hong Kong-Shenzhen Stock Connect also gives international investors access to 880 stocks on one of the world’s busiest exchanges, with a high proportion of them tech related.

The link is an extension of an existing arrangement between Hong Kong and Shanghai that was launch two years ago involving 568 Shanghai listed A-shares and 266 Hong Kong stocks.

A Hong Kong Exchange Clearing and Exchange spokesman declined to comment, adding the Shenzhen link is still pending approval from regulators.