Stalled Shanghai-HK scheme dents shares
Print Edition
THE stalled linkup between the Shanghai and Hong Kong bourses hit financial stocks on both exchanges yesterday, left investors in the dark about the scheme’s future.
The stock connect program had been expected to go live yesterday, but banks and asset managers complained last week that the scheme rules were unclear, and on Sunday Charles Li, chief executive of Hong Kong Exchanges and Clearing Ltd, said it had not received regulatory approval.
That will have come as a blow to banks and brokerages that have been hiring traders for what BNP Paribas has estimated could generate more than US$3 billion a day in extra trading by giving outside investors direct access to Chinese mainland stocks.
Li said he was “not in the loop” about when it might happen and could not say which agency on the mainland was ultimately responsible for giving the green light.
MSCI, which compiles global stock indexes, said a significant delay in the scheme, which had been hailed as a milestone in the opening-up of China’s capital markets, could stop it adding mainland stocks to its emerging markets index. That in turn would limit the range of investors willing or able to invest in mainland stocks.
Greater clarity needed
Jack Wang, deputy chief marketing officer at China CSOP Asset Management based in Hong Kong, said investors had invested a lot of money preparing for the scheme and needed greater clarity from the Chinese government on timing of the scheme. The Hong Kong and Chinese mainland governments had said in April they were looking for a launch within six months.
“From a client perspective, they definitely want to see a clearer picture ... You can keep people guessing for half a year, but you can’t keep people guessing for five years.”
Likewise, a long-awaited program that would allow global fund managers to distribute Hong Kong-domiciled funds in China’s mainland, unveiled early last year, appears to have been temporarily shelved.
“They are now trying to get there, but there is still a long way to go in terms of how to communicate to the rest of the world,” said Wang.
Shares in HKEx, the world’s largest listed stock market operator, closed down 4.7 percent on Monday, and Citic Securities and Haitong Securities were among financial stocks down sharply on both the Hong Kong and Shanghai bourses.
The drop in HKEx helped pull down the Hang Seng Index about 0.7 percent, while the Shanghai Composite Index lost 0.51 percent to 2,290.44 points.
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