MARKET regulators in China have blocked foreign purchases of shares in a Shenzhen-listed stock through the Hong Kong connect gateway as offshore ownership of the firm neared the 30 percent cap, their first such suspension of cross-market stock trade.

The Hong Kong stock exchange said in a statement Tuesday it has halted buy orders from overseas investors in Han’s Laser Technology under the Shenzhen-Hong Kong Stock Connect, although it would continue to take sell orders.

According to the Shenzhen Stock Exchange’s website, the proportion of Shenzhen-based Han’s Laser Technology shares held by overseas shareholders reached 28.38 percent Tuesday. It did not name who the foreign buyers were.

The suspension is the first due to foreign ownership restrictions under the connect program linking Hong Kong and mainland bourses.

It also comes amid a surge in foreign interest in Chinese stocks as the government steps up efforts to attract foreign capital to counter the impact of the Sino-U.S. trade war, raising concerns about the prospect of similar disruptions ahead.

“Since China intends to attract more overseas capital into the domestic market, and Chinese A shares are now being included into many global indexes, shouldn’t the government consider relaxing foreign ownership rules?” said Eugenie Shen, managing director of the Asia Securities Industry & Financial Markets Association.

“Overseas asset managers are very worried about this. They don’t want to be forced to sell newly-bought shares in a China-listed company.”

Under Chinese rules, combined foreign ownership in a China-listed company must not exceed 30 percent, while the ownership cap for an individual overseas investor is 10 percent.

Foreign inflows into the country’s stock market are expected to double this year from last year to 600 billion yuan (US$89.37 billion), according to China’s securities regulator.

While most Chinese firms are overwhelmingly held by onshore investors, the question of foreign stock ownership could become more pressing as global index publishers start including Chinese mid and small-cap stocks into their global benchmarks.

Han’s Laser issued a statement Tuesday saying that the company’s production and operations were currently normal and that it had no major information to disclose. (SD-Agencies)