Since 2014, the Stock Connect scheme has become a major channel for Hong Kong and international investors to buy stocks on the Chinese mainland. But cross-border traders have grown frustrated in recent months, as they have been unable to access a wave of blockbuster listings by AI companies on the mainland.

Likewise, mainland investors could not take advantage of a string of recent initial public offerings by artificial intelligence firms in Hong Kong. Here, we explain why Stock Connect does not cover IPOs by AI firms – and how the problem could be fixed.

What is the Stock Connect scheme?

Hong Kong Exchanges and Clearing (HKEX) and the Shanghai Stock Exchange launched the first Stock Connect in November 2014. The scheme allows international investors to trade Shanghai stocks via a broker in Hong Kong, while mainland investors can trade shares in Hong Kong through a broker in Shanghai.

Two years later, the scheme expanded to include the Shenzhen Stock Market, and since then it has also added bonds, swaps, exchange-traded funds and a Wealth Management Connect scheme.

In the first quarter, average daily turnover on the Stock Connect’s southbound channel – which refers to mainland investors trading Hong Kong stocks – reached HK$122.5 billion (US$15.6 billion), up 11 per cent year on year, HKEX data showed. Meanwhile, the northbound channel – Hong Kong investors trading mainland stocks – saw daily turnover jump 70 per cent to 324.1 billion yuan (US$47.4 billion).

Why are cross-border investors unable to buy many of the mainland’s hottest AI stocks via Stock Connect?

The scheme still does not have an “IPO connect”, so investors in Hong Kong have not been able to subscribe to a wave of red-hot IPOs on the mainland in recent months.