Mainland, HK unveil cross-border trading plan for stocks

A plan to allow cross-border stock trading between the Hong Kong and Shanghai stock markets was presented on Thursday, the mainland's latest move to open up its capital markets.

The trial will begin in six months and enable dealers to invest in designated shares through local securities firms or brokers, the China Securities Regulatory Commission said in a statement with the Securities and Futures Commission of Hong Kong.

"It is an important step in the opening up of China's capital market and will enhance capital market connectivity between the mainland and Hong Kong," it said.

The pilot program allows a maximum cross-border investment of 550 billion yuan ($90 billion). Investors in Shanghai and Hong Kong will be able to buy and sell up to 23.5 billion yuan of stocks in certain companies each day on each other's exchanges under the program.

Premier Li Keqiang said at the Boao Forum for Asia that the plan "will enable us to expand market access, foster a better business environment to unleash greater dividends of reform, spark social creativity and stabilize market expectations".

The Shenzhen Stock Exchange has not yet been included in the program.

Hong Kong and foreign investors will be allowed to buy as much as 13 billion yuan a day in Shanghai-listed stocks through the Hong Kong market.

Mainland investors, which will be limited to institutions and individuals holding at least 500,000 yuan in their stock and cash accounts, will be able to purchase up to 10.5 billion yuan daily in Hong Kong-listed stocks through the Shanghai bourse.

Some analysts said the program will lift the Hong Kong stock market thanks to increased investment because many mainland investors are interested in buying H-shares — mainland companies listed in Hong Kong — but have been previously restricted from doing so.

"Trade volume in the Hong Kong stock market will be largely boosted," said Oliver Meng Rui, a professor at the China Europe International Business School in Shanghai.

He said the quota is significant to Hong Kong because it accounts for almost a quarter of the current daily turnover.

Rui said many mainland investors will try to diversify their portfolio by purchasing Hong Kong-listed stocks through the program.

As Hong Kong shares are denominated in the Hong Kong dollar, it helps investors to reduce risks of holding only renminbi assets, he added.