China Equities Lower after Foreign Investment Link Delayed

Stocks in China fell Monday after a trading program letting more foreign investment into mainland China was delayed.  Hong Kong’s Hang Seng Index led Asian bourses lower with a loss of 1.2% in early trading, while the Shanghai Composite Index was down 0.7%.  The Hong Kong Exchanges & Clearing Ltd., the biggest bourse operator by market value, slumped 3.4%, after the stock exchange said Sunday that a trading connection with Shanghai still hadn’t received regulatory approval. Investors previously expected the program to launch before the end of October.

No new launch date has been set, although the exchange said the technology and infrastructure for the program is in place. Shares of Hong Kong Exchanges & Clearing gained 33% since the program was first announced in mid-April. In the same period, the Hang Seng lost 1.3% while the Shanghai Composite Index gained 8.1% as of last Friday’s close.

Analysts attribute the split in performance to investors taking advantage of price arbitrage opportunities between the two markets. Shares of firms listed on both exchanges have on average traded more cheaply on the mainland in recent years.


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