Brokers upbeat as through train off to slow start

Brokers are looking beyond a disappointing first week for the much-hyped through train stock trading scheme to the prospect of improved turnover, when market sentiment on both sides of the border picks up and more international funds clear regulatory hurdles that have kept them on the sidelines.

Turnover for the first five days of the scheme that links the Hong Kong and Shanghai markets stood at 29 billion yuan (HK$36.7 billion), according to the China Securities Regulatory Commission. Northbound trade accounted for 87 per cent of the volume, highlighting a lack of interest among mainlanders in Hong Kong stocks.

A move by the Hong Kong Monetary Authority to scrap the 20,000 yuan daily exchange cap served to boost the yuan conversion rate but did not, as intended, see the funds flow into stocks. Investors' ability to freely exchange any amount of yuan from other currencies had been seen as key support for the scheme.

In southbound trade, mainland investors tapped into just 3 billion yuan of trading quota in the first week, representing a scant 1.2 per cent of the total 250 billion yuan quota for buying Hong Kong stocks. Only 1.8 per cent of the 10.5 billion yuan daily quota was used yesterday.

Even the more active northbound trade used up only 24 billion yuan of the quota this week, or 8 per cent of the 300 billion yuan total quota for Hong Kong and international investors to buy A shares. Yesterday's trading saw 18 per cent of the 13 billion yuan daily quota used. The daily quota was filled on Monday's launch, when trading was limited to purchases.

"It is not really a big surprise because the market sentiment was not good this week," said Ben Kwong Man-bun, a director of broker KGI Asia. "Turnover may go up over the longer term, however. We have seen that many Hong Kong investors have shown an interest in the scheme but they are just waiting for the right timing."