Everyone waits on China as Leung seeks date on stock link

Leung Chun-ying, Hong Kong’s Chief Executive, told reporters yesterday he will discuss the start date and seek China’s support for the program during the Asia Pacific Economic Cooperation meeting scheduled this month in Beijing

The exchanges are ready. Regulators have signed off. And now Hong Kong’s leader says he hopes the program will start soon.
All that’s needed for the Hong Kong-Shanghai bourse link to begin is a green light from China’s top leadership, according to Zheshang Securities Co. and Dragon Life Insurance Co. Brokers and investors, who had anticipated making their first cross-border trades last month, have been left in the dark on the start date after six months of preparation.
Delays in the program, which gives foreigners unprecedented access to China’s USD4.2 trillion stock market and lets mainland investors buy Hong Kong shares, have fueled volatility in the city’s equities and sparked losses in shares of Hong Kong Exchanges & Clearing Ltd. While Chinese Premier Li Keqiang hasn’t spoken publicly on the start date or reasons for the delay after unveiling the plan in April, some investors say China’s leadership may be waiting for clarity on tax rules and an end to pro-democracy protests in Hong Kong.
“The final say on when the exchange connect will start should be in the charge of the State Council, and top leaders still want to see how the event in Hong Kong is going,” said Wu Kan, a money manager at Shanghai-based Dragon Life, which oversees about $3.3 billion.
Hong Kong Chief Executive Leung Chun-ying told reporters yesterday he will discuss the start date and seek China’s support for the program during the Asia Pacific Economic Cooperation meeting scheduled this month in Beijing.
The Shanghai Composite Index rose less than 0.1 percent at the close yesterday, bringing this year’s gain to 15 percent. The Hang Seng Index dropped 0.3 percent.
China is counting on the success of the bourse link, which allows a net 23.5 billion yuan ($3.8 billion) in daily cross-border purchases, to help liberalize its financial system and increase use of the yuan.
“The deciding power on when to start the link should be in the hands of levels that are higher than the CSRC, say, the State Council,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. The CSRC, or China Securities Regulatory Commission, is the nation’s financial markets regulator while the State Council is the country’s cabinet.
Preparations for the link are in the final stage, the Shanghai Securities News reported on Oct. 30, citing Yao Gang, vice chairman of the CSRC. Hong Kong’s securities regulator said a day earlier it had completed work for the program.
HKEx is at the “completion stage” of preparation for the link, Chief Executive Officer Charles Li said in a conference call with reporters on Oct. 26, declining to speculate on a timeframe for the start date.
The Shanghai bourse has finished preparation for the link, Reuters reported on Oct. 29, citing Bo Que, an executive vice president at the bourse. A press official from the Shanghai exchange declined to comment.
“I feel that the Shanghai-Hong Kong link will start in the near term,” Chen Li, China equity strategist at UBS AG, said by phone from Shanghai Monday. “It’s a matter of picking timing.” Bloomberg