HK-Shanghai pilot program will not be shelved

Preparations said to be in place; can be started as soon as decision is made

The pilot program to connect the Shanghai and Hong Kong stock markets is unlikely to be shelved and the central government will not allow Hong Kong's international status to be weakened, a senior research fellow with a government think tank said Monday.

The opening-up of the mainland's capital market, especially its connecting with Hong Kong's capital market, will prompt the mainland to speed up reforms on mechanism and regulatory measures, Zhang Chenghui, head of the Research Institute of Finance at the Development Research Center of the State Council, said at a press conference in Beijing.

It will also help enhance the ability of those financial institutions which are only accustomed to operating in the mainland market to allocate their assets on the global capital market, Zhang said.

The program to connect two bourses on the mainland and Hong Kong is mutually beneficial so it is unlikely to be put aside, Zhang noted.

Zhang's comment came after the much-awaited Shanghai-Hong Kong Stock Connect program missed its expected launch date on October 27. Anxiety has been brewing across the markets on the mainland and Hong Kong about whether the program will be aborted amid the ongoing Occupy Central movement in Hong Kong.

In a statement e-mailed to the Global Times on Monday, Hong Kong Exchanges and Clearing Limited (HKEx) said the parties involved are technically ready to implement the stock connect program.

It also reiterated an early statement that it has not received the relevant approval for the launch of Stock Connect, and there is no firm date for its implementation, noting further announcements will be made when there are developments with the launch date.

On October 26, HKEx announced the program would be delayed until an unspecified date.

Meanwhile, John Tsang Chun-wah, Hong Kong's financial secretary, said on Monday that all preparations for the program have been in place and it will be launched immediately after regulators decide it before he set off for Beijing to meet with the central bank, financial and business regulators on the mainland, news portal cnstock.com reported on Monday.

The Shanghai-Hong Kong Stock Connect program, a landmark in the opening-up of the mainland's capital markets, was approved by the China Securities Regulatory Commission (CSRC) and the Securities and Futures Commission (SFC) of Hong Kong in April to allow mutual trading on the two cities' bourses.

"It makes no sense that the program will be aborted because all signs show that the preparations of all parties were close to completion. It's only a matter of time and I bet it's getting closer," Li Daxiao, -director of research with Shenzhen-based Yingda Securities Co, told the Global Times on Monday.

"But some detailed rules still need to be worked out and trading on the mainland's A-share market should be brought in line with the international practice to reduce the tax burden on investors," Li said.

CSRC could not be reached for comment by press time. Yao Gang, deputy chairman of CSRC, said at a meeting on Thursday that preparations for the program have entered the "final stage," Chinese financial news portal cnstock.com reported Thursday.

Ashley Alder, chief executive of the SFC, was quoted by Reuters as saying on Wednesday that the SFC had completed all regulatory steps needed for the launch and hoped trading would start in the "not too distant future."

Currently, the mainland charges 10 percent capital gains tax and 5.6 percent tax on business profits while Hong Kong does not. It remains unclear how the earnings will be treated under the program.