PBoC mistake stokes industry frustration
A freshly posted article on the Chinese central bank’s website raised hopes yesterday that the Shenzhen Connect trading link would launch this year, before it was made clear that the document was almost six months old.
The mistake has further stoked industry frustration over delays in schemes for accessing the Chinese market, such as Shenzhen Connect and Hong Kong-Shanghai mutual recognition.
The Hang Seng Index climbed 3.1% in the morning session yesterday on the ‘news’ and closed the day up 2.2%, while the CSI300 gained 4.7% by the close.
Before the document was published, it was generally thought that Shenzhen Connect would not launch until the first quarter of 2016, following the mainland stock crash and related government intervention in the summer.
The article – which said the trading link would launch this year – was written by Zhou Xiaochuan, governor of the People's Bank of China, and posted some time on Tuesday on the central bank’s website and its official Chinese Financial News site.
The PBoC, unusually, made a clarification during lunch time that the article was a reprint of a speech made by Zhou on May 27.
Meanwhile, Hong Kong’s stock exchange said in a statement yesterday that Shenzhen Connect was still subject to regulatory approval and that no agreement had been made on the launch timing. The scheme will allow trading of Shenzhen stocks directly from Hong Kong and vice versa.
Even once the Connect is announced, the market has been told by the Hong Kong exchange that it will be three to four months before the scheme goes live, said an industry source.
“The industry would certainly like several months to prepare, as significant work has to be done on systems and documentation, and to prepare clients,” noted Nick Ronalds, head of equities at the Asia Securities Industry & Financial Markets Association.
“The end of the year is a particularly challenging time for major new initiatives because many firms’ IT systems are subject to freezes during the last month or more,” Ronalds added.
Certainly, one senior insider remarked privately this week that he thought it very unlikely that the launch will be announced before 2016.
Still, some feel it's not out of the question that it will happen this year. "A before-year-end launch should not come as too much of a surprise if you look at the continued broader opening up of [capital] markets and access for both investors and firms alike,” said Stephen Barton, deputy director of strategic solutions at Shanghai-based consultancy Z-Ben Advisors.
Both the Hong Kong and Shenzhen bourses have said that the operating platform is ready and they are awaiting the green light from the China Securities Regulatory Commission. However, as with other cross-border investment schemes, the State Administration of Foreign Exchange also plays a key role in approval, as the link involves capital market opening.