Small brokers pass up through train ticket

Smaller Hong Kong stockbrokers are taking a more cautious view on the stock through train scheme - largely reflecting cost hurdles - as the larger players gear up for the programme that will link the city's market with Shanghai's.

The more than 110 brokers on board for the cross-border trading plan with Hong Kong Exchanges and Clearing represent 80 per cent of the exchange's total market turnover. Some 340 brokers, mostly smaller operators, are on the sidelines for now.

The need to dig deep for costly preparations - from system upgrades to the establishment of A-share research teams - explains why many smaller operators are sitting it out. "I think the through train would bring in new business but it involves investment in a trading system and research. It would be difficult for the small brokers to afford that," an official at a small brokerage said.

While caution reigns among the smaller operators, their larger peers are busy making preparations to capture new business from the scheme, expected to begin in October.

In April, Beijing announced the scheme would allow Hong Kong and international investors to trade up to 13 billion yuan a day, or 300 billion yuan in total, in A shares listed in Shanghai. Mainland investors can trade up to 10.5 billion yuan a day, or a total of 250 billion yuan, in Hong Kong stocks.

While the launch date has not been set, brokers in Shanghai and Hong Kong have been busy upgrading their trading system to match the scheme's requirements. They will participate in a connectivity test on August 23, followed by full-scale tests with the two exchanges and mainland brokers on August 30 and September 13.