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Shirley Yam

The Shanghai-Hong Kong Stock Connect is a marriage between a dog and a fish. The challenge in consummating the union is best told by the uncertainty over its launch date.
When the sun rose on April 10, nobody attending the Boao Forum knew for sure that Premier Li Keqiang would announce the historic scheme.
By then, Hong Kong and mainland regulators had been discussing it for more than a year and there had been wind of it getting Li's blessing.
At 10.20am, Li told the conference Beijing would "actively create conditions to establish the scheme" as part of the country's opening up to international markets.
As Hong Kong Exchanges and Clearing rushed to suspend trading in its shares at 10.40am, the regulators were then told behind closed doors that they had six months to get the so-called "through train" up and running.
It is not just any scheme.
It is about trade between two stock markets that are wide apart in their regulatory regimes and maturity.
It is about the flow of billions of dollars between a hard-currency regime and a non-convertible one every day.

	Whether to switch on the engine or not is now a political decision
It is about one of the largest and perhaps most complicated breakthroughs in the mainland's financial reform.
There was, however, no time to argue. There were only six hours to put together a joint announcement to tell the world what the scheme was about.
With the working deadline set for October 27, exchange staff in Hong Kong and on the mainland worked into the small hours for six months to get the "rails and carts" ready.
Even the key hurdle - whether foreign investors should pay the capital or withholding tax when trading mainland shares - was understood to have been overcome. The rails and carts are all there.
Yet, two days before the deadline, nobody knows when the train is arriving. All the market knows is that the decision is with the "regulators" - as described by the Hong Kong exchange.
With the Hong Kong and mainland securities regulators having already signed an accord on the scheme a week ago, the term "regulators" can only mean one thing in the context of China - state leaders. In short, whether to switch on the engine or not is now a political decision.
Contrary to some speculation, Beijing is hesitating on the launch date not because it wants to bring disobedient Hong Kong to its knees.
Instead, it is concerned that a lengthy lead time between the announcement and actual trading will play into uncertainties, sources say.
What uncertainties?
The Occupy movement, which shows no sign of being resolved, is one of them. Imagine a major crackdown on the protesters when mainland investors have loaded up on Hong Kong stocks via the through train. In the eyes of Beijing, that would be a "bad start".
The shorter the lead time, the greater the control, the lower the uncertainty and therefore the lower political risk for those making the decision.
But, isn't clarity the best way to mitigate uncertainty? Lay out all the rules and specify a launch date that will allow the market sufficient time to work out the nuts and bolts as well as to digest the risk and rewards. The uncertainties will then be priced in.
But that is not the way things are done in the mainland regulatory regime, where "mother knows best".
In this part of the world, government cadres set the timetable. If they want a policy ready in six months, it's ready in six months - at least on paper.
Then, they time everything - be it a policy change or a public offering - for what they believe is the best effect, maximum stability.
Once they decide the time has come, they would summon the brokers or investment bankers, announce a policy, set a tough launch date and tell them heads will be rolling if the job is not done on time and without fault.
Not many will say no. After all, most market players are state-owned. As long as their personal income is not affected, they will go along with it.
The hasty building of the through train, followed by the cluelessness over its arrival, is only one of many replays of the government-led philosophy so evident in Beijing.
The train will arrive in the end. Just don't forget who the driver is.
shirley.yam@scmp.com


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Money Matters

Through train stock scheme just waiting on the driver

With the working deadline set for October 27, exchange staff in Hong Kong and on the mainland worked into the small hours for six months to get the "rails and carts" ready.

Shanghai shares fall on delay in cross-border trading plan

The delay had "disappointed" investors.

Business

Money

Markets & Investing

Opinion

With all the rails and carts ready, it is matter of when the cross-border share trading will take off as 'regulators' wait for the best timing


The Shanghai-Hong Kong Stock Connect is a marriage between a dog and a fish. The challenge in consummating the union is best told by the uncertainty over its launch date.


Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

White Collar

.css-1m2rp1p{color:#34b8b5;}White Collar | Through train stock scheme just waiting on the driver

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}With all the rails and carts ready, it is matter of when the cross-border share trading will take off as 'regulators' wait for the best timing

White Collar | Through train stock scheme just waiting on the driver

With all the rails and carts ready, it is matter of when the cross-border share trading will take off as 'regulators' wait for the best timing