Tuesday, November 17, 2009

Closed markets prevent arbitraging

While severe price discrepancies exist between the values of shares listed on each exchange, the closed nature of the markets prevents arbitraging that would bring parity to the various valuations.

Analysts say the next logical step would be a merger of the A and B markets, and some years down the track the opening up of the yuan to foreign exchange markets.

"We don't expect to see the yuan traded on the open markets for at least five to 10 years," says Ong. "That means the liquidity on the Chinese markets will be less like it is in Hong Kong than, say, Malaysia, where the ringgit is also a closed currency.

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