Market Segmentation Analysis Of A/H Markets Under The Background Of Shenzhen-hong Kong Stock Connect

On December 5,2016,as an upgraded version of the interconnection mechanism between Chinese mainland and Hong Kong,Shenzhen-Hong Kong Stock Connect officially started.This marks a new step in the coordinated development of the capital markets of A/H and China.It is an important measure for the expansion of the domestic capital market and has accelerated the process of marketization,legalization,and internationalization of China's capital market.Shenzhen-Hong Kong Stock Connect,the interconnection and exchange mechanism for trading stock markets in Shenzhen and Hong Kong,allows investors in both Shenzhen and Hong Kong to use this mechanism to buy and sell stocks in each other's markets within the shares of Shenzhen-Hong Kong Stock Exchange.The opening of Shenzhen-Hong Kong Stock Connect is of great significance.It will further promote the two-way opening up of the capital markets in the two places and ease the fragmentation of the A/H markets so that the two markets will form an effective complementary benign development relationship.The use of RMB for settlement by Shenzhen-Hong Kong Stock Connect will promote the internationalization of RMB and enable China's capital market tointegrate into the international market faster.In addition,Shenzhen-Hong Kong Stock Connect will further strengthen the development of the capital market in the Mainland and make it more capable,orderly and healthy.Therefore,the dissertation studies the change of the A/H market segmentation in the context of the opening of Shenzhen-Hong Kong Stock Connect,from the perspective of the price-linked relationship between the A-H market and the A/H-share premiums cross-listed between Shenzhen and Hong Kong,to investigate whether the introduction of Shenzhen-Hong Kong Stock Connect has indeed effectively eased the fragmentation of the market between Hong Kong and the Mainland and improved the linkage between the two markets.By referring to theoretical analysis and research results of academic circles on market segmentation and the most significant manifestation of market segmentation,theoretical and empirical research on the phenomenon of cross-listed stock price differences,the paper has conducted empirical research to reflect Shenzhen-Hong Kong Stock Connect through the following two aspects: The impact on market segmentation between the two places:(1)The overall level of the market.Established VAR and VECM models for the two-month intraday 15-minute price data before and after the opening of Shenzhen-Hong Kong Stock Connect and the Hang Seng Index and Shenzhen Stock Exchange,and used Granger causality,impulse response function and variance decomposition to analyze the two markets so as to study the impact of Shenzhen-Hong Kong Stock Connect on the market segmentation of the two places.The study shows that before the opening of Shenzhen-Hong Kong Stock Connect,there was no significant co-integration relationship between the 15-month index price series of the Shenzhen Composite Index and the Hang Seng Index.After the opening of Shenzhen-Hong Kong Stock Connect,the two have a co-integration relationship;and with the opening of Shenzhen-Hong Kong Stock Connect,the Shenzhen Stock Exchange Index and the Hang Seng Index have increased their influence on each other,and their linkage has increased.(2)the impact of Shenzhen-Hong Kong Stock Connect on the premium level of A/H shares cross-listed between Shenzhen and Hong Kong.The paper uses the weekly data of 15 sample companies cross-listedbetween Shenzhen and Hong Kong within 4 months before and after the opening of Shenzhen-Hong Kong Stock Connect.By selecting appropriate explanatory variables and introducing the dummy variables for the opening of Shenzhen-Hong Kong Stock Connect,a panel model is established for A/H shares.Regression analysis was conducted on the factors affecting the premium rate to analyze the impact of Shenzhen-Hong Kong Stock Connect on the premium level of A/H shares cross-listed between the two places.The empirical findings revealed that the opening of Shenzhen-Hong Kong Stock Connect,factors of liquidity differences,factors of information asymmetry,and irrational behavior of investors have a very significant impact on the A/H share premium level of cross-listed companies in Shenzhen and Hong Kong during the sample period.The opening of Shenzhen-Hong Kong Stock Connect reduced the premium level of A/H shares and eased the market segmentation.Finally,the paper concludes the empirical conclusion.Overall,the opening of Shenzhen-Hong Kong Stock Connect has strengthened the interconnection between the two markets,effectively reduced the barriers to capital circulation in both Shenzhen and Hong Kong,broadened the investment and exchange channels for investors in the two places.The degree of influence of the Hang Seng Index and Shenzhen Stock Exchange on each other has increased and the market connection has increased.The implementation of Shenzhen-Hong Kong Stock Connect has also affected the behavior of investors in the two places.The investment concept and valuation pricing system have been brought closer to each other,which has reduced the cross between Shenzhen and Hong Kong.The listed A/H share premium level,market segmentation between Shenzhen and Hong Kong markets has been eased.Afterwards,the innovative points and limitations of the thesis were explained,and the following policy recommendations were put forward based on theoretical analysis and empirical conclusions: first,to further expand the scope of interconnection;second,to reduce the access threshold for investors;third,to strengthen market supervision and improve market development.