A trading link between Hong Kong and Shanghai's stock exchanges will start on November 17 after weeks of delays, the Hong Kong exchange announced Monday, in a move that lifted both markets and is expected to lead to billions of dollars in daily transactions.
The Hong Kong Monetary Authority described the "Shanghai-Hong Kong Stock Connect", which is seen as a key step towards greater financial liberalisation in China's economy, as a "milestone".
"The SFC and the CSRC jointly announced today that the launch of Shanghai-Hong Kong Stock Connect on 17 November2014... has been approved," a statement issued by the Hong Kong Stock Exchange (HKEx) said Monday. The exchange said it "welcomes today’s announcement".
The SFC is Hong Kong's Securities and Futures Commission (SFC), and the CSRC is the China Securities Regulatory Commission. Hong Kong shares ended Monday 0.83 percent higher while Shanghai added 2.3 percent.
Charles Li, chief executive of HKEx, said that market rallies showed the scheme was "very strongly endorsed". "We have seen a very strong rally at the Asia market today we haven't seen for a longtime," he said.
"It's something very new and it's never been tried before. It's going to work but there might be glitches along the way," he added.A half-day trial would be conducted on Saturday before the official launch, Li said.
Hong Kong Chief Executive Leung Chun-ying thanked "state leaders and Central Government", adding that he thought Hong Kong could "make greater contribution to the reform and opening up of the country".
The platform - which was expected to be launched last month before being delayed -will allow international investors to trade selected stocks on Shanghai's tightly restricted exchange and let mainland investors buy shares in Hong Kong. It is thought up to $3.8 billion in cross-border trades will
be carried out each day.
"This marks an important milestone in the liberalisation of the mainland's capital account," said Norman Chan, chief executive of the Hong Kong Monetary Authority.
The venture is expected to see volumes on both exchanges rise significantly, particularly Shanghai, but is subject to strict limits in order to preserve capital controls in China, where authorities keep a tight grip on the yuan currency. Sam Lau, chairman of investment firm HeungKong Financial, said
he expected the move to lead to his company's profits doubling.
"For our company, we do both Hong Kong onshore and offshore equities investment," he said, speaking on the sidelines of an Asia-Pacific Economic Cooperation (APEC) business meeting in Beijing.
"There are many stocks that you can buy in Hong Kong - they're really great companies but they're not listed in China, they're listed in Hong Kong. "For example like Tencent, like Galaxy, those kind of gambling, entertainment stocks. So I think the money will go into those kind of stocks.
"In China those big stocks will be securities firms, those will be benefitting as well."
Analysts said the link-up would boost market confidence and was a "bigstep" in the opening up China's yuan-denominated domestic market - known is the A-share market. "Despite the limited degree of opening-up, it still means a great deal to the domestic capital markets and the whole financial system," said Shen Jun, a Shanghai-based analyst with BOC International.
"ft also involves direct cross-border renminbi flows, and it's a trial for the opening-up of the domestic capital markets and the capital account, ” he added.
The connection had been pencilled in to kick off last month but was unexpectedly cancelled. However claims it had been delayed because of pro-democracy protests in Hong Kong were denied by exchange president Chow Chung-kong, who told AFP last month that the city's authorities have " no control over the proceedings".