China wary of Shanghai-HK bourse links -HK official

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BEIJING, Sep 14 (Reuters) Hong Kong and mainland stock markets will eventually be linked, but it is still too early for concrete progress towards that end, a senior Hong Kong securities official said in remarks published on Friday.

Hong Kong Chief Executive Donald Tsang in June endorsed the idea of trading Hong Kong- and Shanghai-listed shares on each other's exchanges despite China's capital controls and said both parties were discussing the mechanics of an arbitrage mechanism.

The Hong Kong government raised its stake last Friday in market operator Hong Kong Exchanges and Clearing Ltd <0388.HK>, increasing speculation that Hong Kong could be gearing up for an alliance with the Shanghai or Shenzhen bourses.

Financial Secretary John Tsang said the move would enable the government to contribute to the development of HKEx, particularly in strategic partnerships with Chinese institutions.

But Sun Jie, senior vice president for China Affairs with the Hong Kong Securities and Futures Commission, was quoted by the official China Securities Journal as saying Beijing was understandably cautious about bridging the two markets.

''The increase of the Hong Kong government's stake in HKEx is a natural move, and it's too early to talk about concrete steps in merging the mainland's and Hong Kong's bourses,'' the paper paraphrased Sun as saying.

Sun, who used to be a senior official with the mainland's securities watchdog, said a tie-up could have a profound long-term impact on China's market.

Sun said China's was also right to take its time in implementing a landmark scheme permitting Chinese residents to invest directly in Hong Kong stocks.

The programme was announced on Aug. 20 but has yet to take effect.

''Regulators see the risks, and it's understandable that they are getting cautious,'' Sun was quoted as saying.

He said most mainland investors, even given the chance to invest in Hong Kong, would prefer to stick with the domestic A-share market.

Reuters SZ VP0732

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