Through-train stock scheme likely to see slow start amid Occupy unrest

Financial fallout from Occupy Central and the student protest movement has sparked a dramatic shift in the trading dynamics for investors eyeing the potential to profit from the so-called through train scheme that will link the Hong Kong and Shanghai stock markets.

The valuation premium of the city's stocks over their Shanghai counterparts has been wiped out, leaving investors little chance of making money from arbitrage between the two markets.

Brokers and fund managers warn of more selling if Occupy Central escalates, resulting in a quiet debut for the scheme.

Investors were initially enthusiastic about the stock through train scheme, expected to begin this month, which will allow investors to conduct cross-border trading of stocks listed in Hong Kong and Shanghai under a total quota of 550 billion yuan (HK$694 billion).

International or Hong Kong investors will be able to trade up to 13 billion yuan of Shanghai-listed A shares a day while mainland investors will be able to trade up to 10.5 billion yuan of Hong Kong shares a day.

The scheme had been expected to provide arbitrage opportunities for investors to take profit by trading stocks listed in both markets with big price gaps.