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Nov 04, 2015

Outdated article on Chinese central bank website sparks stock rally

Misleading article claims Shenzhen-Hong Kong Connect program expected by end of year

Chinese shares soared in the minutes after China’s central bank published undated comments that a program to connect the Shenzhen and Hong Kong stock exchanges will be in place by the end of this year.

The problem is that the comments were made in a speech by People’s Bank of China governor Zhou Xiaochuan in May – before the summer stocks rout that prompted heavy government intervention and the delay of the Shenzhen-Hong Kong stock market link, which would allow foreign investors greater access to the mainland market.

Stocks gave up some of their gain as traders realized the comments on the People’s Bank website were no longer valid. In the early afternoon, the bank issued a statement clarifying that the comments were from May 27, but did not explain why it published the governor’s comments more than five months late.

Before the clarification, shares in Hong Kong Exchanges and Clearing (HKEx) itself had jumped as much as 9 percent, and the HKEx’s market capitalization surpassed $33 bn, temporarily making it the world’s biggest exchange operator. The Shenzhen Composite Index rose 5.1 percent and the Shanghai Composite Index gained 4.3 percent, while shares in Chinese mainland brokerages soared.

‘As we accelerate the nation’s opening of trade and investments, we need to speed up the opening of the financial sector,’ the outdated article reads. ‘This year the Shenzhen-Hong Kong Connect will be launched; this will show a new channel between China’s capital markets and the world has opened.’

Before clarification from the central bank, major financial media including Bloomberg, Reuters and others had covered the announcement, writing stories that the delayed Shenzhen-Hong Kong link was now back on track to open in the coming weeks.

HKEx found itself forced to publish a statement denying the comments from China, saying it ‘wishes to emphasize that as at the date of this announcement, the proposed Shenzhen Stock Connect is still subject to regulatory approval and no agreement with our counterparts has been entered into.’