Shanghai stock market unlikely to follow Hong Kong trading hours

PUBLISHED : Monday, 28 July, 2014, 4:27am
UPDATED : Monday, 28 July, 2014, 4:27am

Shanghai is unlikely to stretch stock exchange trading hours to match Hong Kong's, despite growing calls for combined action when the through train trading scheme takes off in October.

The decision could dent regulators' attempts to create an effective arbitrage system in the event of any disparity between A and H shares.

Shanghai begins trading at 9.30am, stops for lunch at 11.30am and resumes at 1pm before closing at 3pm.

Hong Kong trades between 9.30am and 4pm, with a one-hour break for lunch at noon.

According to sources, Shanghai will initially keep trading hours unchanged when Hong Kong and mainland investors begin dealing in each other's markets in October.

The through train scheme was hailed as a major breakthrough in Beijing's financial policymaking as the China Securities Regulatory Commission was resolute in raising the share market to international standard.

The revival of the scheme, four years after Beijing shelved a similar plan in 2010, heightened hopes for a drastic liberalisation of the share market as free-market advocates pushed for a head-to-toe change of the trading system.

"Mainland regulators are reluctant to implement substantial changes, at least during the beginning," Shenyin Wanguo Securities analyst Qian Qimin said. "It won't be a complete arbitrage system when operations start."

To extend trading hours, the regulators and stock exchange have to solicit brokerages' views before making a decision.

Sources said the regulators, normally obsessed with market stability, decided against making changes.

"They want to see the through train's impact on the market [is] controllable," Haitong Securities analyst Zhang Qi said. "High volatility is the last thing the officials want to see."

The price gap between A and H shares are expected to narrow as the through train scheme creates an arbitrage mechanism that could drive A shares up to be more in line with the valuation of H shares.

On Friday, companies dual-listed on the mainland and Hong Kong saw their A shares trade at a 9.8 per cent discount to their H shares.

Under the through train programme, Hong Kong investors can buy up to 300 billion yuan (HK$375 billion) of A shares, while the limit for mainland buyers is 250 billion yuan.

The mainland market is still subject to a daily trading limit of 10 per cent and a T+1 system, which bars investors from buying and selling the same shares in a single day, to curb volatility.

Hong Kong and Shanghai are expected to undertake joint efforts to test the through train scheme in the next two months before officially starting the much-hyped plan.