While the equity markets have been wreaking havoc with portfolios, pricing modals and traders’ lunches, it might also delay the much-anticipated link between Hong Kong and Shanghai.
According to a report in the South China Morning Post, Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia said on Monday that it may not be the right time to talk about mutual market access, bolstering the belief by brokers in the city that the proposed plan to connect the Hong Kong and Shenzhen stock markets may be postponed to next year.
“Psychologically, this is not the time to talk a lot about mutual market access, ” Li said in a keynote speech at a conference in Singapore. “When you just put out a fire, you don’t want to talk about buying a new sofa and doing a nice window dressing. You want to calm down, figure out how to clean up, then move forward.”
He added that a “slowdown of the pace” of the connection is likely.
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“The most difficult is the cash equity access. This involves retail investors and is the most sensitive in China. China is traded by 80 per cent to 90 per cent by retail investors. That dictates a certain governmental-behaviour and processes that drives government decisions,” he added.
HKEx chairman Chow Chung-kong has said earlier this year that the Shenzhen and Hong Kong stock connect is expected to launch by the end of this year.
Li was also reported as saying that ongoing market volatility may lead to a postponement of some other major projects.
“The good thing is the bridge is already there; the tracks are laid, the trains have gone. Now the only thing that is going to slow down is the dispatch of the next couple of trains,” Li said in his speech in Singapore.
Christopher Cheung Wah-fung, lawmaker for the financial services sector, told the newspaper that brokers would be disappointed if the cross border scheme between Hong Kong and Shenzhen is delayed.
“Many brokers have invested a lot of money to improve their trading system for the new cross border trading linkage. They have also hired more people to handle the extra business,” Cheung said. “Shenzhen Stock Exchange is also very keen on building up the ties with Hong Kong Stock Exchange. We would like to see Mr Charles Li to work with the mainland authorities to launch the connect scheme as soon as possible.”
Cheung said the market’s sharp movements should not be a reason to delay the plan.
“Both the China Securities Regulatory Commission and People’s Bank of China has said the market has stablized. This has paved the way for the new stock connect to be launched,” Cheung said.
