Reuters
Date: May 12, 2015
By: Faith Hung and Michelle Price

A mooted equity trading link between Hong Kong and Taiwan has been described by some traders and investors as a flawed – and potentially costly – attempt to replicate the hugely successful Hong Kong-Shanghai stock connect.

Hong Kong’s tie-up with Shanghai since November has sparked an explosion in turnover, with a flood of mainland money boosting Hong Kong Exchanges & Clearing Ltd’s (HXEx) market capitalisation to nearly $4 trillion in recent weeks.

Much of the trading has exploited unique arbitrage opportunities created by the large discount between shares of Chinese companies listed in both Shanghai and Hong Kong.

But such conditions do not exist for Hong Kong and Taiwan, and with their stock markets already liquid and open to foreign institutional investors, allowing direct trading on each another’s bourse would be a needless and expensive programme, many traders say.     [FULL  STORY]