The South China Morning Post reports that China may be considering scrapping the “through-train” program allowing domestic retail investors in China to directly purchase Hong Kong shares. Instead, a more comprehensive system for qualified institutions, instead of individuals, to invest in Hong Kong would be developed. Red Cat Journal notes, with interest, that this article was relegated to the third page of the business section as opposed to top billing on the first page when the “through-train” program was first proposed.
Red Cat Journal's original comments regarding the announcement of the through-train program have even more resonance, in light of the potential scrapping of the “through-train” program. The Red Cat Journal proposed that the original announcement of the “through-train” plan, in August, may have been a stabilizing measure meant to prop up the Hong Kong market during the U.S. subprime meltdown panic. Given the Hang Seng Index’s 36% rise from that point, it would seem that Hong Kong’s stock market has been successfully propped up. In fact, further stock price share growth along the lines of what has occurred over the last three months would share more in common with a runaway train than a stalled automobile that has been given a jump-start. Therefore, with the announcement of the “through-train” program already having done much more than was required of it, the actual approval of the “through-train” program is no longer necessary, and would perhaps be too much at this juncture. If the “through-train” program has been well and truly scrapped, the Hong Kong market may take a breather from here on out.