In a previous missive the Red Cat Journal speculated that China's move to allow domestic mainland Chinese investors to invest in the Hong Kong stock market could've been a savvy PR move to support Hong Kong shares during the initial period of the sub-prime meltdown. Now, comes news that the timetable for this "through-train" plan is in limbo, perhaps delayed indefinitely. In our view, this just lends more credence to the possiblity that China's leaders are more market savvy than the mainstream media gives them credit for.

If market support to insulate the Hong Kong market from the US sub-prime fallout was the goal, the goal was more than acheived. In fact, you could say the goal was overshot! From Aug. 22, when the "through-train" program was announced until Oct. 16, the Hang Seng Index has risen 33%. But the Hang Seng China Enterprises Index, which tracks more pure-play China companies, is up 57% over the same time period.

With that kind of performance, it's no wonder that Mr. Xiao Gang, head of the Bank of China and appointed to head-up the "through-train" project, indicated that there has been no progress and no timetable for the plan. He would certainly be worried about adding more fuel to a fire that was started by the announcement of the plan in the first place. Given the hype surrounding the "through-train" plan, this could be one of the few cases where "buy the rumor, buy even more on the news" is a real possibility, instead of the usual "buy the rumor, sell on the news" advice. And now it look like the "news" may be a while in coming.

Let's see how the Hong Kong market digests the potential delay. Probably 'not well' in the very near-term. Not to worry, however, for there's always a new rumor around the corner. Until the next rumor...