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Hong Kong exchange boss vows Shanghai stock link-up will proceed
[PARIS] A delayed watershed scheme to allow cross-trading between Hong Kong and Shanghai's stock markets will go ahead, the president of the Hong Kong bourse has said, adding ongoing democracy protests have not derailed the project's progress.
The Shanghai-Hong Kong Stock Connect platform will enable international investors to trade selected stocks in Shanghai's tightly-restricted exchange and allow mainland investors to buy stocks in Hong Kong.
Its launch had been widely expected this week but senior officials announced over the weekend that it had been delayed.
In an interview with AFP in Paris on Tuesday, Chow Chung-kong, president of the Hong Kong Stock Exchange, insisted the project "will be set up, but you'll just have to wait a little longer".
"We do not know when it will be introduced, as we have no control over the proceedings," he said on the sidelines of a conference in the French capital to boost economic cooperation with Hong Kong.
"This is a major decision for the Chinese government and must take into account a range of factors" to "select the best time," he added.
Mr Chow insisted that more than a month of mass rallies and roadblocks calling for full democracy in the former British colony were not behind the delay.
"From a technical point of view, it is not possible to connect the two," he said, adding that on the whole Hong Kong's market was "functioning normally" throughout the unrest.
On the wider economic impact of the protests on the city, he said: "I would not say that there is absolutely no impact, but it is mostly limited to the occupied areas." Protesters currently control three major intersections in the city with the largest camp situated opposite the city's government headquarters.
Mr Chow's comments are in direct contrast to earlier remarks by the Hong Kong bourse's chief executive Charles Li who said on Monday that the ongoing protests could impact the future of the scheme.
"If (the protest) drags on, it's impossible for it not to be affected. This is important for Hong Kong," Mr Li told reporters.
China's premier Li Keqiang announced plans for the project in April and Chinese and Hong Kong authorities issued a statement that month saying it would take "approximately six months" to launch.
But in a statement issued late Sunday, the Hong Kong stock exchange said no start date had been set for the scheme, and it had yet to receive regulatory approval.
Mr Chow said ongoing uncertainty over how trading via the scheme will be taxed was partially behind the delay.
"The question is whether shares bought and sold in Shanghai will be subject to taxes on capital gains," he said.
"Of course, we hope this will not be the case, but it is possible. Either way it is especially important that this be clarified," he added.
Media reports last week said that the Asia Securities Industry and Financial Markets Association (ASIFMA), representing some of the world's biggest banks and asset managers, had written to Hong Kong regulators asking for a delay because of uncertainty over the scheme's rules.
A spokesman for ASIFMA declined to comment on the reports.
If it goes ahead, the scheme is expected to see volumes on both exchanges rise significantly, particularly Shanghai, but it is subject to strict limits in order to preserve capital controls in China, where Communist authorities keep a tight grip on the yuan currency.
Plans for a similar tie-up in 2007 sparked a surge in share prices in both bourses but they were eventually scrapped as the global financial crisis unfolded.
Mr Chow's comments came as Hong Kong's Financial Secretary John Tsang, who was also visiting Paris this week, insisted the city was still open for business.
"We are doing our best to bridge the divide that exists in our community," he said.
"I am confident that today's differences will certainly help us realise a better Hong Kong tomorrow." The protests are taking place against a backdrop of rising inequality, soaring living costs and anger over the cosy relationship between the government and Hong Kong's financial elite.