Stock plan 'delayed' by protests

A customer checks share prices at a securities firm in Qingdao, Shandong province, on Nov 3, 2014. The widely anticipated "through train" stock program might have been delayed due to the illegal protests in Hong Kong, an official at a think tank said. [Yu Fangping / China Daily]

Top expert says 'Occupy Central' is negative factor for cross-border trading program

The Shanghai-Hong Kong Stock Connect program is "unlikely" to be shelved, but could be further delayed if protesters in Hong Kong "continue making trouble", said an official of a top think tank on Monday.

Zhang Chenghui, director of the Finance Institute under the Development Research Center of the State Council, told a news conference that she believed Hong Kong's Occupy Central movement was a cause for the delay of the pilot share trading program.

"I personally feel that if the demonstrators keep on putting up a show, it will be a negative factor for the establishment of the stock investment linkage between the two financial markets, and it can be harmful for the development of stronger economic ties," she said.

It was the first time that a Chinese mainland scholar with an official background has made the connection between the delay in the launch of the program to the illegal Occupy Central movement.

The center is a high-level think tank directly affiliated with the State Council, China's cabinet. It is known to provide regular consultations to the cabinet and the Central Committee of the Communist Party of China.

Zhang emphasized that her comments represented only her personal view. But her words have been taken seriously by stock brokers and investors in Hong Kong and Shanghai because of the status of her organization.

Nobody expects the proposed Stock Connect will be dropped. But the delay is widely seen as a setback that has disappointed many supporters of the program, which many hope will increase the liquidity in both markets.

A delegation led by Hong Kong Financial Secretary John Tsang Chun-wah is visiting Beijing from Monday to Wednesday, and Hong Kong Monetary Authority Chief Executive Norman Chan said the visit will include discussions with central government officials on issues related to capital flows, especially the limit on the amount of renminbi that a Hong Kong resident can buy or sell in a day, Finet Group Ltd, a Hong Kong-listed financial information provider, said on Monday.

"I am optimistic, believing and hoping the program will kick off before the end of this year," said Eliot Li, a director at the Hong Kong-based brokerage First Shanghai.

Li said that since last month, the company has been keeping a renminbi pool sufficient to prepare for the Stock Connect program.

"We are certain that there will be explosive growth in the demand for the renminbi in Hong Kong at the start (of the Stock Connect)," he said.

"We do not think the stock program will be put off indefinitely. It is unlikely to start in the following few weeks, but it can still get the go-ahead," said Song Jian, an analyst with Beijing-based Minzu Securities Co Ltd.

Zhang said that the exact timing will be up to the China Securities Regulatory Commission.

"Given the wide difference in the regulatory regimes of the Hong Kong and mainland capital markets, it may seem wise to take the time to iron out every issue before giving the go-ahead for the Stock Connect program," she said.

Li said he hopes there will be more clarity on tax policies, explaining that Hong Kong investors are not familiar with the system of withholding capital gains tax.

"It is not easy for us to withhold clients' money," he said. "But if we don't, we could face problems in collecting tax payments from clients when it is time to pay," he said.

Premier Li Keqiang said in early April that the authorities would launch the cross-border stock trading program within six months. It was widely considered to be an important way to increase cross-border capital flows, further open up China's capital market and move forward with the yuan's internationalization.