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Liu Mingkang has suggested the through train is on the wrong tracks |
The plan was first launched in August by Beijing’s FX regulator, Safe. Hong Kong stocks predictably soared, on the expectation that the local bourse would soon be flooded with capital from China’s estimated $2.7 billion household savings. A few weeks later, China’s bank regulator, Liu Mingkang, said that he didn’t much like the idea of Chinese capital leaving the country, suggesting the "through train" was on the wrong tracks.
Oddly, Hong Kong stocks soared some more, clearly suggesting that local investors thought he must be having them on. In the 10 weeks from Safe’s announcement to November 2, the Hang Seng index had managed to jump 54%, ending that day at an all-time high of 31,361. The next day, the through train jumped the tracks, after Chinese premier Wen Jiabao suggested that the plan would probably be delayed. Stocks plummeted, falling to below 28,000. At that point, Hong Kong Exchanges and Clearing chairman Ronald Arculli leapt predictably into the fray, throwing out transport clichés left, right and centre.
A train-load of clichés
The through train had not jumped the rails, he said. It was on track; it would arrive as punctually as a local MTR metro train; it would carry with it great and glittering treasure chests of gold for the Hong Kong economy, etc, etc.
Shares, equally predictably, again bounced in Hong Kong. Under different circumstances, one might presume that China’s leaders had personally made big bets via their brokers on Hong Kong market turbulence, and were keen to create as much of it as possible in order to cash in. Other cynics have even suggested that the through train was only a temporary ruse to create stability and harmony in the Celestial Empire in the run-up to Beijing’s giant coming-out flapdoodle, otherwise known as the 2008 Olympic Games.
By announcing the plan, they gently deflated mainland stock prices (however briefly) and caused Hong Kong’s paper wealth to soar in value (however temporarily). The trouble will only come if Beijing has to explain to Hong Kong that the through train was never supposed to leave the station.