The Thru Train Stops

Trading throughout the week was weak as the double whammy of sub prime problems in the US, and the news that the Chinese government is turning off the illegal funds flow dominated the news.

Apparently, the Shenzhen Branch of the PBOC (people's Bank of China, the Central Bank) instructed the Shenzhen Banks to limit the amount of cash that can be withdrawn by customers to try and stem the flow of illegally remitted funds to HK. The Mainland authorities were concerned that Chinese ccitizens were abandoning the Mainland market for HK where the same shares can be bought at a lower price.

The thru train (where chinese citizens will be allowed to invest directly in the HK market) has now been put back with no date. This is apparently caused by concerns that the Mainland investors are not sophisticated enough to play in the open HK market against foreign hedge funds who will offload shares to them at a high price. Hmm, interesting concept that. They can buy the same shares of dual listed companies in HK at a lower price than in China but we are still worried that they are buying them at too high a price in HK?

I guess since HK is an open market, the hedge funds can take their money and run which is not possible on the Mainland since China is a closed market. However that still leaves the investor with shares that are still cheaper than what they have to pay for them on the Mainland.