Hong Kong, Shanghai Stock Connect Postponed

Hong Kong and mainland Chinese shares have taken a dive by falls in brokerages. The drop was caused by uncertainty over the launch of a cross-trading scheme linking the Hong Kong and Shanghai exchanges.

A long-awaited scheme to allow cross-trading between Hong Kong and Shanghai's stock markets was delayed indefinitely, the head of the Hong Kong Stock Exchange, Charles Li, said Monday, warning that pro-democracy protests might seal the fate of the project.



The envisaged Stock Connect platform would enable international investors to trade selected shares in Shanghai's tightly restricted exchange and allow mainland investors to buy stocks in Hong Kong.



The scheme had been widely expected to launch this week, but the tie-up was postponed over ongoing mass demonstrations demanding Beijing allow semi-autonomous leadership elections.



No plain sailing



In addition, the project was put off as investors expressed concern about a lack of clarity on taxation issues.



Li said Hong Kong did not have a say on when Stock Connect could start, although the technical infrastructure was already in place. If it goes ahead, it is expected volumes on both exchanges will rise significantly.



Plans for a similar cross-trading project back in 207 sparked a surge in share prices, but the idea was eventually scrapped as the global financial crisis unfolded.



hg/cjc (AFP, Reuters)