China Plan to Buy Hong Kong Stocks May Be Delayed, Wen Signals
Premier Wen Jiabao's comments on a plan to allow Chinese investors to buy Hong Kong stocks may signal a delay in its implementation, analysts said.
The government needs to study the risks, increase knowledge among Chinese investors and prepare regulations to protect the stock markets in Hong Kong and at home before launching the program, Wen said yesterday during a trip to Uzbekistan.
China's currency regulator on Aug. 20 said Chinese investors in the northern Tianjin city's Binhai economic zone will be allowed to invest in Hong Kong stocks with a Bank of China Ltd. account. Since then, the benchmark Hang Seng Index has surged more than 40 percent.
``The government has encountered difficulties to launch the plan and it will take some time,'' said Wu Kan, an analyst at Shanghai Securities Consulting Co., today in a telephone interview.
Liu Fuhua, a spokesman for China Securities Regulatory Commission, declined to comment today when contacted by Bloomberg News on the telephone.
``We don't expect a dramatic impact on Hong Kong stocks, as the market already anticipated a delay in the launch of the `through-train' program,'' said Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. in Hong Kong, today in a telephone interview.
China is easing curbs on capital outflows as it battles with surging inflows that lead to higher inflation, soaring stock and property prices and excessive factory investments.
The current-account surplus, a gap for trade in goods and services, widened 78 percent in the first six months of 2007 from a year earlier to $163 billion. The capital and financial account, a measure of investment flows, almost tripled to $90 billion.
The State Administration of Foreign Exchange last month pledged that it will relax limits on capital outflows.
``It's a matter of time,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong, today in a telephone interview. ``The `through-train' will come, but the Chinese government is cautious and therefore it needs an extra few months for preparation.''
China's economy, the world's fourth-largest, expanded 11.5 percent in the third quarter from a year earlier. Fixed-asset investment in urban areas climbed 26.4 percent in the first nine months, up from the 24.5 percent pace in the whole of 2006.
Even as inflation slowed to 6.2 percent in September from a peak of almost 11 years on smaller food price gains, it still exceeds the key one-year bank deposit rate of 3.87 percent. That encourages households to switch savings into stocks and real estate.
The benchmark CSI 300 Index of shares has soared 168 percent this year. Property prices in China's 70 major cities jumped 8.9 percent in September from a year earlier, the biggest since records began in August 2005.
To cool the world's fastest-growing major economy, the People's Bank of China has raised interest rates five times, ordered lenders to set aside bigger reserves and sold bills to drain cash from the financial system.
``We agreed with Premier Wen that the `through-train' should be launched at the right timing,'' H.F. Wong, a spokesman for the Hong Kong Monetary Authority, said today. ( Bloomberg )