Jake's View | Cross-border stock trading scheme is not a through train but a milk train
The new direct share trading agreement and wide restrictions will only increase inefficiency
Hong Kong's financial services minister has warned market players not to expect the quota under the proposed cross-border stock trading scheme to be increased after it is filled, despite complaints that the cap is too low.
They call it a through train but this latest scheme to allow limited ownership of Hong Kong shares in the mainland, and vice versa, is like no through train on which I have ever ridden.
On a real through train from Shanghai, you would get on at the Shanghai station, having already passed Hong Kong border checks there, and then zip straight through to the Hung Hom station. You would then wonder why you had bothered when, with the traffic jams these days, the short ride home from Hung Hom would take you as long again.
With this new direct share trading arrangement, however, what you get is the milk train, the one that stops at every farmers' village and makes you wonder why anyone ever thought the train was an improvement on the horse.
Who really wants to stick money into that dysfunctional market … ?
The proper use of a through train metaphor in economic reform is in reform that takes you all way you want to go in one non-stop move. For stock markets it would mean opening the Shanghai market to all investors around the world without restriction and permitting Chinese nationals to invest anywhere in the world.