SHANGHAI (Reuters) - China's securities regulator and its Hong Kong counterpart said on Thursday they would allow mainland investors to trade shares in designated companies listed in Hong Kong, while letting Hong Kong investors buy selected Shanghai-listed shares.
The China Securities Regulatory Commission (CSRC), in a joint statement with the Hong Kong Securities and Futures Commission, said the pilot scheme would be limited to companies already listed in both Shanghai and Hong Kong, as well as selected other blue-chip companies.
Trading volumes will be subject to overall and daily quotas, the agencies said in a statement published on the CSRC website.
"Allowing mutual investment in Shanghai and Hong Kong stocks is an important opening of China's capital markets," the statement said. "It will facilitate the connection of the capital markets of the two areas, promoting the bilateral opening of the capital markets, among other multiple positive factors."
During the trial period, Hong Kong investment in mainland stocks will be limited to an overall quota of 300 billion yuan (S$60.2 billion) overall and a daily quota of 13 billion yuan.
Mainland investment in Hong Kong stocks will be limited to 250 billion yuan overall quota and 10.5 billion yuan daily quota. Hong Kong will also require mainland investors to be institutions or individuals with 500,000 yuan in their accounts.
The pilot project will launch after a preparation period of about six months.
The regulators said the move would help China's efforts to internationalise its currency, the yuan, and create new investment channels for yuan held outside China. But the statement did not specify whether participants in the pilot would be allowed to convert yuan to Hong Kong dollars and vice versa, or whether only yuan funding could be used for the pilot.
The announcement follows a statement on Thursday by Chinese Premier Li Keqiang previewing the announcement.
"We will actively create conditions to establish a transaction interconnection mechanism for the Shanghai and Hong Kong stock exchanges, to push forward the two-way opening of capital markets in mainland China and Hong Kong," Mr Li said at the Boao Forum for Asia in China's southern island province of Hainan.
Hong Kong Finance Minister John Tsang also said on Thursday that Beijing was preparing a new round of opening up to overseas investors including a Hong Kong-Shanghai mutual investment scheme.
Trading in shares of Hong Kong Exchanges and Clearing was halted on Thursday morning.