Brokers accept delay in stock through train scheme
Industry observers say pushing back the launch of the through train scheme will give regulators more time to clarify the tax and holiday issues
Brokers have accepted a slight delay of the through train scheme as they want the authorities to clarify the outstanding issues over tax and holidays before the launch of the plan to connect the stock markets of Hong Kong and Shanghai.
Beijing has not yet announced a launch date although a government source told the that Financial Secretary John Tsang Chun-wah and other financial officials would be available to go to Shanghai on October 27 for a ceremony to mark the launch.
The absence of an announcement in the China Securities Regulatory Commission's (CSRC) weekly media briefing last Friday has led market participants to speculate that the scheme may have been pushed back to November or December.
"If the through train scheme will not start from [October 27] as the market has widely expected, it is not too bad as there are many outstanding issues that have not yet been cleared," said Christopher Cheung Wah-fung, a legislator for the financial services sector.
"The mainland has not yet announced if overseas investors who trade in the country's stock markets would need to pay capital gains tax. Beijing also has not yet announced if it would lift the cap for Hong Kong individuals to exchange up to 20,000 yuan [HK$25,250] a day. If the scheme takes off a bit later, it will allow more time to discuss these issues."
Beijing said in April that it wanted to connect the Hong Kong and Shanghai stock markets, allowing mainland investors to conduct cross-border trading at a total quota of 550 billion yuan.
A similar through train scheme was proposed in August 2007 but was suspended a few months later as the mainland feared the set-up had deficient controls.
This time round, Cheung believes the scheme will not be called off, saying the regulators in Hong Kong and on the mainland were still giving updates on the progress of the through train last week.
On Friday, the Securities and Futures Commission and the CSRC signed a memorandum of understanding to strengthen their cross-border regulatory and enforcement cooperation to monitor malpractices under the scheme.
Joseph Tong Tang, executive director of Sun Hung Kai Financial, said that if the scheme was delayed slightly, it would not be a surprise.
"This is not a good time to launch the scheme because the stock market in Hong Kong is volatile due to the uncertainties over Occupy Central with protesters still blocking the streets of key financial areas. And overseas markets such as the United States are also not doing well lately," Tong said.
KGI Asia director Ben Kwong Man-bun said his firm was fully prepared for the launch of the stock through train plan but he would not mind the delay.
"There are still some issues that need to be clarified such as the holiday issues because the Hong Kong and mainland markets have different holidays. If the scheme is to be suspended on both holidays of Hong Kong and the mainland, it will not be very ideal," Kwong said.
He said many investors were interested in the scheme but he does not think they will trade on the opening day.
"No matter if the scheme will start in October or November or at a later stage, it would be a good opportunity for retail investors to trade A shares directly for the first time. This is why many investors have shown an interest," Kwong said.
"However, this is still something new to them and they will need to wait and see to learn more about the A-share market before they bet their money there."
