China has officially quashed a plan to let China-based retail investors buy shares in overseas stock markets, after letting the scheme languish for several years.
China’s foreign exchange regulator made the news official in a notice dated Dec. 18 but posted on its Web site this week that lists the plan among a number of trial measures that expired without being implemented.
The plan, dubbed the “through train” (直通車) by investors, pushed Hong Kong shares sharply higher in 2007 on expectations that Chinese would first be allowed to buy shares on a trial basis in the territory’s bourse, one of Asia’s largest.
Hong Kong’s Hang Seng slipped 62.79, or 0.3 percent, to 21,654.16 yesterday. China’s benchmark Shanghai Composite Index edged up 8.6 points, or 0.3 percent, to close at 3,224.15.
The notice by the State Administration of Foreign Exchange did not provide any explanation why the measures were allowed to lapse. Analysts, however, said it was not surprising given the lack of progress since they were issued in 2007.
Market regulators have indicated Beijing plans instead to move ahead in coming months with various reforms, including allowing some choice foreign companies, such as the Hongkong & Shanghai Banking Corp, to list on Chinese bourses.
“Instead of us going out, it seems we prefer them to come in,” said Qian Qimin (錢啟敏), a senior analyst at Shenyin Wanguo Securities (申銀萬國證券).
Regulators keep tight controls on the markets in Shanghai and Shenzhen, limiting daily gains and losses in most cases to 10 percent. In theory, retail investors are confined to investing in Chinese shares, though many circumvent restrictions through offshore accounts.
But Hong Kong’s more stringent disclosure requirements and its Western-style legal system are seen as advantages over Chinese markets, which operate in a less reliable legal environment and have long been plagued by insider trading and other abuses.
China does allow investments through a so-called “qualified domestic institutional investor” program, which grants quotas to banks and other financial institutions for overseas securities investments.
The Shanghai Composite Index soared 80 percent last year, amid optimism over the strong growth potential for China’s own economy, which expanded 8.9 percent in the third quarter. Fourth quarter figures are due out next week.
China’s strong growth has also buoyed the Hang Seng Index, which includes many big Chinese companies. It gained 52 percent last year, its biggest rise in a decade.
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