Date
22 September 2017
The State Council has given the green light for a linkage between the Hong Kong and Shanghai stock exchanges. Photo: Bloomberg
The State Council has given the green light for a linkage between the Hong Kong and Shanghai stock exchanges. Photo: Bloomberg

The Big Picture: GIFT-WRAPPED POLITICAL REFORM

The next few months are likely to bring more breakthroughs in mutual recognition of investment funds between Hong Kong and the mainland as the central government continues to make friendly overtures to the city amid talk of change in the city’s political system.

The State Council gave the green light Thursday for a linkage between the Hong Kong and Shanghai stock exchanges, and Beijing will promote talks on mutual fund recognition, Xiao Gang, chairman of the China Securities Regulatory Commission, told the Boao Forum in Hainan Friday.

Xiao said much of the preparation on the issue had already been completed by the mainland parties.

Premier Li Keqiang’s sudden announcement last week of the bourse approval was clearly a political move designed to foster a friendly atmosphere ahead of Sunday’s meeting in Shanghai between Hong Kong lawmakers and Beijing officials, observers said. Before the announcement, regulators on both sides had expected the bourse talks to take at least another six months.

In reality, all parties will need half a year to implement the scheme.

Discussion about political reform in Hong Kong is set to increase in the next six months so Beijing will probably unveil more so-called supportive measures to win over the city’s residents in return for a conservative universal suffrage proposal.

The next “gift” will probably be mutual recognition of funds, a move that will likely come this summer, some observers said.

That gift would be much greater than the bourse linkage because it will mean huge business opportunities on the mainland for Hong Kong’s fund brokers. If the city’s fund houses can sell their products on the mainland, they will definitely expand their portfolios and invest more in stocks, start-ups and various financial products.

In all, Hong Kong’s capital market is accidentally benefiting from the rising political tension between Hong Kong and Beijing. But the gifts from Beijing over the next 12 months will probably be the last because the political reform discussion is likely to end in mid-2015.

China broadband market set for sea change
China Telecom (00728.HK) and China Unicom (00762.HK), two of the nation’s big three state-owned telecoms service providers, are facing more competition in the fixed-line broadband business as authorities seek to allow private players into the segment by enabling the lease of last-mile networks.

According to Xinhua, the Ministry of Industry and Information Technology is seeking further reforms in the telecoms sector. In addition to the nationwide mobile virtual network operator trial, the authorities will also begin improving arrangements for network access.

That could result in opening up of the broadband connectivity business to private enterprises, throwing down a challenge to the state-owned firms.

– Contact HKEJ at [email protected]

JP/SK

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