HONG KONG, Oct 18 — Brokers are no closer to knowing when a link between Hong Kong and Shanghai’s stock exchanges will begin as a six-month deadline runs out.

Chinese stocks erased gains in the two cities yesterday after Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Charles Li told reporters there is no timetable for the program. Last month, he said the link may begin on a Monday in October, which would leave Oct. 27 as the last start date.

When China’s Premier Li Keqiang unexpectedly announced the plan to connect the two exchanges in an April 10 speech, regulators said the link would begin in six months’ time. The lack of a definitive commencement is raising questions over the readiness of regulators and brokers for the program that will give overseas investors unprecedented access to mainland shares.

“Undoubtedly this means a delay, but for how long, that will now be the biggest question,” Andy Maynard, global head of trading and execution at CLSA Ltd., said in Hong Kong. “Some investors will be slightly frustrated as they have done considerable work to be ready in time.”

Connecting markets with different trading rules, regulators, currencies, taxes and holidays has occupied brokers since the link was unveiled in April. Exchange officials and traders in Hong Kong and Shanghai have spent weekends testing systems, clearing and settlement in readiness for the start, including a full trial in August.

“We don’t have a timetable,” Li told reporters yesterday. “Whether it’s announced today, tomorrow, the day after, two days after, or any other day, it is not important which day it is going to be announced, people shouldn’t read too much into the timing of it. The main issue is that we are prepared for the starting gun.” Li added that any announcement of the start date won’t be made “unilaterally” by a regulator.

Stocks sink

The Shanghai Composite Index tumbled as much as 1.9 per cent after his comments, while the Hang Seng China Enterprises Index reversed a gain of 1 per cent to fall as much as 0.9 per cent before recovering some of its losses. Stocks had risen on speculation the China Securities & Regulatory Commission would announce Oct. 27 as the start at a regular briefing yesterday.

The Shanghai Composite has climbed 11 per cent since April 9 on the prospect of overseas inflows. Investors opened the most accounts to trade mainland A shares in more than two years in the last week of September, according to official data.

“Without a timetable, the market is obviously disappointed,” said Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong. “Because A shares were supposed to be a bigger beneficiary due to direction of fund flows, they are reacting worse.”

Boost yuan

The China Securities and Regulatory Commission didn’t respond to an e-mail query yesterday. Ernest Kong, a Hong Kong- based spokesman at the city’s Securities & Futures Commission, declined to comment.

The SFC and the CSRC signed a memorandum of understanding yesterday to share information on risks and alerts on suspected misconduct under the link program, according to statement by the SFC.

China is counting on a successful bourse link to help liberalize its financial system and increase use of the yuan. Existing rules restrict overseas money managers to foreign currency-denominated B shares, while only those approved under the Qualified Foreign Institutional Investor program can invest in yuan-denominated A shares.

The link, which allows a net 23.5 billion yuan (RM12.6 billion) of daily cross-border purchases, will also help Hong Kong strengthen its status as a gateway to mainland markets as the government tries to end pro-democracy protests that have block some streets in the business district for three weeks.

Student leaders have accepted an offer from Chief Executive Leung Chun-ying to begin negotiations on the city’s new electoral system, though he dismissed their demand that China allow voters to freely choose top candidates.

Through train

Delays on the mainland Chinese side are probably holding back the link, CLSA’s Maynard said.

“My speculation is that the southbound brokers are not ready and voiced their concerns and asked for more time,” Maynard said.

In August 2007, a proposal allowing mainland investors to buy equities in Hong Kong sent the Hang Seng Index up 60 per cent over three months before the plan was abandoned during the global financial crisis. The new exchange link is being implemented with limits on the number of available stocks, mostly larger companies, as part of an effort to attract a stable pool of investors.

Without clear guidance, brokers are growing “anxious” over how long they will have to prepare, said Kevin Rideout, head of execution services for Asia Pacific at Citigroup Inc. Regulators may give two weeks’ notice before the link starts, Hong Kong Exchanges’ Li said at a briefing on Aug. 6.

“It does feel as though the much-anticipated Oct. 27 launch is not going to happen,” Rideout said in Hong Kong. “November smells more likely.” — Bloomberg