Date
19 August 2017
HKEx chief Charles Li would not put the delay down to the Occupy Central protests, but he is confident that it is just a matter of time for the Stock Connect program to finally get going. Photo: Bloomberg
HKEx chief Charles Li would not put the delay down to the Occupy Central protests, but he is confident that it is just a matter of time for the Stock Connect program to finally get going. Photo: Bloomberg

Stock Connect delay a setback for Hong Kong, mainland

The delay of the launch of the Shanghai-Hong Kong Stock Connect program has brought a wave of disappointment to the local bourse.

Widely expected to happen this month, Hong Kong Exchanges and Clearing (HKEx) said Sunday in a notice that all parties are ready for Stock Connect but “HKEx has not received the relevant approval, and there is no firm date for its implementation”.

HKEx chief Charles Li would not put the delay down to the Occupy protests.

But media reports, quoting sources close to Beijing, said the Chinese government is worried that the ongoing street occupation will finally turn into chaos.

With stock transaction volumes shrinking in the past few weeks, if the authorities give the green light to the Stock Connect program in the midst of the political deadlock, there may be a negative impact on the Shanghai exchange.

Christopher Cheung Wah-fung, who represents the financial services sector in the Legislative Council, told the Hong Kong Economic Journal, the parent publication of ejinsight.com, that the Occupy movement has indeed impacted the stock through-train program.

“Mainland officials have had diverse opinions over the launch of the Stock Connect program during some of our recent informal conversations,” Cheung was quoted as saying in an exclusive interview. Some of them doubted if foreign investors would be sufficiently interested in the program at the moment, he said.

Despite the delay, most industry players predicted that as Stock Connect is a major policy set by the state that will benefit the mainland as much as Hong Kong, the project would not be suspended for a long time.

In fact, both Li and Cheung believe that it is just a matter of time before the Stock Connect program finally gets going.

Cheung said it would still be possible for the program to be launched before the end of this year.

Although some may regard the program as a gift to Hong Kong, Stock Connect also has great importance to the internationalization of the renminbi.

The program is also a tool for China to open up its capital account, attract high quality foreign investors and capital into the Chinese market, and boost the country’s stock market.

Hong Kong is the most suitable place to play the above role, as the city is an international finance center with an excellent legal system and free flow of information. Shanghai, Taiwan and even Singapore are all not perfect places to take up this role yet, at least not for now.

So, Hong Kong is the only one that China can rely on in order to achieve the above goals.

As Li said confidently, “we just have to be patient”.

Announced by Chinese Premier Li Keqiang in April, Stock Connect will allow global investors, both institutional and retail, to trade Shanghai A shares via the Hong Kong stock exchange while mainland investors will be able to trade Hong Kong H shares via the Shanghai Stock Exchange for the first time.

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BT/JL

EJ Insight writer

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