HONG KONG: Concerns by Europe’s top funds watchdog that a landmark Hong Kong-China trading link may not adequately protect investors are preventing thousands of funds from buying Shanghai stocks, threatening the success of the project, said market participants.
The so-called Stock Connect scheme, launched on November 17, allows foreign investors to trade Shanghai-listed shares via the Hong Kong stock exchange, and mainland investors to invest in Hong Kong shares via the Shanghai bourse.
But within a week of its launch, trading volumes had dwindled to less than 20 per cent of the maximum allowance.
Banks, fund managers and lawyers said that was because many large European Union-regulated funds were unable to participate until Europe’s main funds regulator, Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF), was satisfied that the scheme protects investors.
About 13,000 global mutual funds, or two-thirds of Europe’s funds industry, are domiciled in low-tax Luxembourg and regulated by the CSSF.
The CSSF, market participants say, wants to be sure that the Chinese shares EU savers buy through the link-up can be adequately recovered should the bank that guards the stocks go bust. Reuters