Fanfare surrounding the Hong Kong-Shanghai stock connect allowing cross-trading between the two cities' exchanges has faded on the second day, with investors staying away in droves.
"The first day was a pretty poor start and follow-on momentum has been weak," said Steve Wang, chief China economist at Reorient Financial. "A lot of our people said, 'why trade it, it's not particularly cheaper?'"
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Indeed, arbitrage opportunities between dual-listed companies' cheaper mainland A-shares and Hong Kong H-shares have largely evaporated, Citigroup said in a note Monday.
The stock connect program allows foreign investors to place buy or sell orders on Shanghai's A-share market through brokers in Hong Kong. Chinese investors meanwhile will be able to use mainland brokers to invest in Hong Kong's H-share market.
There is a daily limit of $3.8 billion in cross-flow purchases -- with Hong Kong investors limited to 13 billion yuan ($2.1 billion) daily in A-share trades. On the program's first day, the entire quota for "north-bound" purchases of A-shares was filled by mid-afternoon, while only around 16 percent of the "south-bound" quota was used by the end of trade, according to Thomson Reuters data.
On Tuesday, the second day, the take up was slim, with around 72 percent of the north-bound quota still available by midday, while only 5 percent of the south-bound quota was used.
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Mainland investors' lack of interest in buying Hong Kong stocks is striking.
"The implication is Chinese retail investors are punters rather than long-term investors, and don't need to go to Hong Kong to do it," Julius Baer said in a note Tuesday.
Reorient's Wang also noted that many mainland investors have been able to set up Hong Kong brokerage accounts for quite some time, making the official stock connect a bit of a yawn.
Others noted that all the usual suspects are still a worry for mainland share markets.
"Just because you can does not mean you should," said Soren Aandahl, head of research at Glaucus Research. "Shanghai-listed companies have a poor record for transparency and the Shanghai stock exchange has a reputation for insider trading, lax accounting standards and subpar corporate governance."
Aandahl also cited concerns that enforcement differences could be a "flashpoint" for the two markets.
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"Hong Kong regulators have a history of clearly delineating and enforcing insider trading rules and Chinese regulators, the CSRC in particular, do not," Aandahl said. "If the playing field is not level, there's going to be an outcry and I think the program will not be unsuccessful."
To be sure, not everyone thinks enforcement is on cross-border investors' minds just yet.
"People are aware that's the risk of buying stocks in China," Wang noted. "That's not something the through train is meant to solve."
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Indeed, Wang expects that once foreign investors begin to get burned by China companies, mainland regulators will be forced to respond.
"That kind of pressure from foreign investors -- to improve corporate governance for example -- is something the regulators had in mind when they started this program," Wang said.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1