he Hong Kong Stock Exchange (HKEx) announced Sunday that it did not know when the Shanghai-Hong Kong Stock Connect, or “Hu-Gang Tong,” would be launched because it has not received the central government’s approval. The pilot program was widely expected to make its debut in October because a joint announcement in April by the securities regulators of Hong Kong and the mainland said preparation would take six months. No wonder many observers interpreted the HKEx’s announcement as the Hu-Gang Tong being delayed or shelved. Some have tied this with the city’s current social and political tensions, saying that Beijing is either halting the program to show who is boss or trying to avoid an unwanted distraction. However, sources close to the situation said efforts are still being made to push forward the program’s agenda, and there is no need to read too much into the Hong Kong bourse’s announcement. Hu-Gang Tong is a pilot program allowing investors in Hong Kong and on the mainland to trade a range of stocks listed on the other side’s bourse through securities firms in their own market. It is part of the central government’s efforts to connect the domestic securities market with those overseas. Fears of the program being derailed by pro-democracy demonstrations in Hong Kong were voiced before the HKEx 0388, +0.12% HKXCF, -5.18% announcement. The Hong Kong Commercial Daily, a Chinese-language newspaper sold in the city and in neighboring mainland areas, cited an anonymous source as saying Hu-Gang Tong will probably not be introduced by the end of the year because central government authorities think the atmosphere in the former British colony is causing bad timing for any new economic cooperation scheme. The source also said regulators do not have any timetable for the program. The indexes for the Shanghai and Shenzhen stock markets opened lower Monday on the news and HKEx’s announcement because the share prices of securities brokers poised to benefit from the Hu-Gang Tong program tumbled. But not everyone is flustered. Several financial professionals in Hong Kong said they believe the program will be launched sooner or later because an open capital account, which China wants, cannot do without it. Andy Maynard, global head of Trading and Execution Services at CLSA, a securities broker and investment bank, said on Oct. 17 that Hu-Gang Tong could be postponed until November or December, partly because mainland securities brokers need more time to get ready. Despite the bourse’s announcement, a source from Beijing with knowledge of the matter said Hu-Gang Tong has not been suspended, and efforts are being made to implement it. Qi Bin, director of the China Securities Regulatory Commission (CSRC)’s international department, was in Hong Kong last Friday, leading a team negotiating with their Hong Kong counterparts on technical details of the stock program. This indicates that the plan has not fallen apart, as some have suggested. There is other evidence the program is making progress. On Friday, the CSRC published amendments to two related policies that addressed the issue of securities depository and clearing institutions representing Hu-Gang Tong investors in shareholders’ general meetings. On the same day, the Hong Kong securities regulator said it has authorized four institutions, including the Shanghai Stock Exchange and China Securities Depository and Clearing Corp. Ltd., to be providers of automated trading services, clearing another obstacle for them to start the Hu-Gang Tong program. These developments demonstrate that Hu-Gang Tong is unlikely to have been halted. Investors may have been too fixated on the timing of the program being launched to see other issues. http://www.marketwatch.com/