Shanghai Stock Exchange ("SSE") released Trial Measures of Shanghai Stock Exchange on Shanghai-Hong Kong Stock Connect and Management Guideline of Shanghai Stock Exchange for Investors Eligbility for Southbound Trading after China Securities Regulatory Commission ("CSRC") had announced on September 26 that the uniform settlement account platform would be launched around China's National Day this year. Although it is only 6 months since the scheme of the Shanghai-Hong Kong Stock Connect was first announced, the A-shares market and Hong Kong equity market have achieved eye-catching performance.

Definition

The Shanghai-Hong Kong Stock Connect is a mutual market access program, through which investors in mainland China and Hong Kong can entrust members of SSE or participants of The Stock Exchange of Hong Kong Limited ("SEHK") to trade designated shares listed on the other's market through securities trading services companies set up by SSE or SEHK at the respective locations. The Shanghai-Hong Kong Stock Connect includes the Northbound Trading Link and the Southbound Trading Link.

Timetable

Li Xiaojia, the CEO of Hong Kong Exchanges and Clearing Limited ("HKEx"), has expected that the Shanghai-Hong Kong Stock Connect would be launched on a Monday in October. Some analysts speculate that the Shanghai-Hong Kong Stock Connect will be officially launched on as early as October 20 or 27. The underlying rationale is that tests are normally carried out on weekends and the Shanghai-Hong Kong interconnection simulation test even requires approximately two weekends, which led to the market consensus on the above launch date.

Threshold

With respect to Southbound Trading Link, individual investors who hold an aggregatebalance of not less than RMB500,000 in their securities and cash accounts with no material badcredit records will be accepted.

Scope

Northbound shares mainly covers three parts, namely the constituent stocks of the SSE 180 Index, SSE 380 Index and listed A shares of A-H listed companies.Southbound shares include the constituent stocks of the Hang Seng HK Large Cap Index and Hang Seng HK Mid Cap Index of the Hong Kong Stock Exchange as well as shares of A-H listed companies listing on the Shanghai Stock Exchange.

It is noteworthy that SSE-listed shares under "Risk Alert" (i.e. ST, *ST shares and delisted shares), SSE-listed shares quoted and traded in foreign currencies (i.e. B shares) and any other shares under special situations identified by HKEx are ineligible to trade through the Northbound Trading Link.

Non-ferrous

A + H: Aluminum Corporation of China, Metallurgical Corporation of China Ltd., Jiangxi Copper Corporation, Zijin Mining Group Co., Ltd., China Molybdenum Co., Ltd.

SSE 180: Zhongjin Gold Corporation Ltd., Chihong Zn&Ge Co., Ltd., Rising Nonferrous Metals Co., Ltd, Shandong Gold Group Co. Ltd., Jinduicheng Molybdenum Co. Ltd., Xiamen Tungsten Co., Ltd., Western Mining Co., Ltd., Inner Mongolia Baotou Steel Rare-Earth Group.

SSE 380: Shandong Nanshan Aluminum Co. Ltd., Jilin Jien Nickel Industry Co., Ltd., Sino-Platinum Co., Ltd., Shandong Hongda Mining Co., Ltd., Sichuan Western Resources Holdings Co. Ltd., China-Kinwa High Technology Co., Ltd, Hunan Corun New Energy Co., Ltd, Tongling Jingda Special Magnet Wire Co., Ltd, Guangdong DongYangGuang Aluminum Industry Company Limited, Xinjiang Joinworld Co., Ltd, New China Dragon Electronic Co., Ltd., Ningbo Yunsheng Co., Ltd, Ye Chiu Metal Recycling (China) Ltd.

Securities Margin Trading

If Northbound investors are allowed to conduct margin trading of their shares underNorthbound Trading Link on the Hong Kong equity market (to buy shares under the NorthboundTrading Link with the capital raised from securities margin financing on the Hong Kong equitymarket), to conduct stock borrowing and short selling (Northbound investors borrowing shares under Northbound Trading Link through stock borrowing on Hong Kong market and afterwards selling them through the Northbound Trading Link), securities margin trading of the Northbound Trading Link shall fall under the scope of SSE securities margin trading, while the short selling price shall not be lower than the latest transaction price and regulations shall be made on the limit of proportion of covered short selling, suspended business, covered short selling etc.

Outlook

Transactions of the Shanghai-Hong Kong Stock Connect can be settled in RMB at both markets. The scheme will further increase the interaction between the domestic capital markets and the global economy. The fluctuation of major international currencies will have greater impact on the exchange rate of RMB, which will further speed up the internationalization of RMB. The Shanghai-Hong Kong Stock Connect will also link up Shanghai equity market and Hong Kong equity market and A shares with low evaluations will benefit from investment concepts such as value investment. Insiders forecast that the next step is to expand the Shanghai-Hong Kong Stock Connect to the Shenzhen Stock Exchange, bulk commodity exchange, etc.

（Source: China Nonferrous Metals Network）

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