Shanghai-HK stock scheme may be delayed
Print Edition
SOME of the world’s biggest banks and asset managers have asked the Hong Kong securities regulator to delay a landmark stock trading link with China’s mainland that could generate billions of dollars of trade a day, due to uncertainty over the scheme rules, according to a letter seen by Reuters.
The Shanghai-Hong Kong Stock Connect scheme, a milestone in the opening-up of the mainland’s capital markets, was widely expected to go live next Monday, but the letter sent on Friday by the Asia Securities Industry & Financial Markets Association (ASIFMA) could push its debut to late November.
The mainland and Hong Kong governments had not announced a start date, but said in April they were looking for a launch within six months, and last month Hong Kong Exchanges & Clearing Ltd (HKEx) told market participants it expected to launch next Monday.
The trading link will for the first time allow international investors to trade Shanghai-listed shares via the Hong Kong stock exchange. Meanwhile, mainland investors will be able to trade Hong Kong-listed shares via the Shanghai bourse.
The scheme could push up the average daily value of stock trading in Hong Kong by about 38 percent to HK$93 billion (US$12 billion) by 2015, French bank BNP Paribas has estimated.
The Shanghai exchange did not immediately respond to requests for comment but HKEx said its market infrastructure and operations were ready.
“Regulators will decide and announce the launch date,” HKEx added.
The Hong Kong regulator declined to comment, and the China Securities Regulatory Commission did not immediately respond to requests for comment.
In the letter, ASIFMA said its members could not begin trading next week because of uncertainty surrounding some technical issues and a lack of clarity over taxation. The association asked for its members to be given a month’s notice before launch.
The letter added that banks would need time to calibrate trading systems and prepare client documentation.
A person familiar with the letter, which ASIFMA circulated to members on Friday, said that while many firms were technically ready to trade, uncertainty over the taxation of capital gains, dividends and other corporate profit remained a major hurdle.
The letter was signed by ASIFMA Chief Executive Mark Austen and copied in HKEx CEO Charles Li.
ASIFMA said in the letter that it was “alarmed” at the prospect of launching next week, given the uncertainties.
Some market participants said two weeks would be enough to complete preparations for the launch.
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