Here's why Hong Kong's Stock Connect programme has been delayed

Approval has yet to be received.

The Hong Kong Exchanges and Clearing (HKEx) had recently announced that it has yet to receive approval from mainland authorities for the launch of the Shanghai-Hong Kong Stock Connect programme, and it noted that the parties involved are technically ready, but there is no firm date for implementation.

According to a research note from Standard Chartered, the long-awaited Stock Connect programme failed to launch within six months of the initial announcement, as planned.

HKEx Chief Executive Charles Li suggested earlier this month that there was no timetable for the launch.

A number of local media – including Hong Kong Commercial Daily and Oriental Daily – interpreted the delay as the result of escalating political tensions in Hong Kong amid month-long street protests, and said it could be delayed indefinitely.

Previously, market participants had widely expected the programme to be officially launched on 27 October.

In response to Hong Kong media reports of an indefinite delay, China’s People’s Daily suggested that the Stock Connect is an established policy and it is only a matter of time before it is launched.

Here's more from Standard Chartered:

We understand that technical issues affecting the launch have been largely resolved, especially in areas such as settlement and FX conversion and capital-gains tax treatment.

A number of Chinese banks announced earlier this month that they had received approval to conduct Stock Connect-related settlement and FX conversion business.

Stock investments under the stock connect programme are likely to be exempt from capital-gains tax, according to China’s Global Times, which said that only a small stamp duty would be tested during the Stock Connect trading platform test conducted by the Shanghai Stock Exchange (SSE) in late September.

Many foreign investors who access China’s onshore securities via the Qualified Foreign Institutional Investor (QFII) and R-QFII programmes are still subject to a 10% provisional capital-gains tax charged by custody banks, although some investors recently received an exemption from the SFC.