Another Positive Down The Drain

The HK market was supposed to be on the receiving end of a the "through-train" program which would have allowed individuals from the mainland to trade in all HK listed securities. The proposal back in August caused a dramatic revaluation in the HK market. However, owing to the corrective phase in Shanghai and Shenzhen, apparently the long-awaited through-train scheme will not start for at least two years.

The program for individual mainland investors to put money directly into Hong Kong stocks has been held up because the mainland authorities want more time to make sure everything is running smoothly in the new system before opening it up to the public. Also, the authorities feel there is no need to rush the launch of the through- train program since mainland investors can already use the QDII program to invest their money overseas. BS, the reason why the program was delayed was due to the significant pullback in China stock markets. If the Shanghai and Shenzhen markets had continued to surged, believe you me, the "through-train" program would have been accelerated to allow liquidity to pour out of the system.

When news of the program first surfaced in August, the market became flush with excitement, thinking a torrent of money might start flowing into Hong Kong almost immediately. Now, we will see the same air being sucked out of the system in HK. Downgrade on HK immediately. The sentiment has turned.