A groundbreaking program allowing Chinese investors to trade directly in Hong Kong shares could be put on hold, leaving analysts to wonder what may come of the strong stock market gains that were made as a result of the anticipation, affecting out markets and exchange traded funds (ETFs) alike.  The State Administration of Foreign Exchange (SAFE) announced a pilot program in August to allow Chinese investors to invest in H shares.  It needs approval from the China Banking Regulatory Committee. 

Jonathon Cheng for The Wall Street Journal reports that the Chinese Premier Wen Jiabao  wants the government to  pull back and fully consider all possible results that would negatively impact mainland and Hong Kong stock markets. Massive funds flooding the Hong Kong markets concern many because of the potential to weaken mainland markets. Beijing officials are wary that the mainland markets will overheat eventually. In Hong Kong, the markets reacted to the further delay, falling 5%. The ETFs that track China and Hong Kong were also affected by the news, losing over 5%.

  • iShares FTSE/Xinhua China 25 Index (FXI)
  • SPDR S&P China (GXC)
  • PowerShares Golden Dragon Halter USX China (PGJ)
  • iShares MSCI Hong Kong Index (EWH)

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