A pilot program linking the Hong Kong and Shanghai stock exchanges will form a key part of China's plans to internationalize its currency, the chief executive of Hong Kong's stock exchange operator said on Tuesday.
Earlier this month, China's securities regulator said it would allow cross-market stock investment by mainland and Hong Kong investors in an effort to liberalize capital flows.
All trades into Shanghai will be carried out and settled using the yuan, said Charles Li, the head of Hong Kong Exchanges and Clearing Ltd. 'This clearly facilitates the internationalization of mainland capital markets by attracting a broader institutional investor base to China,' Mr. Li said.
Home laws would govern stocks traded between the two exchanges, he added. The program is expected to launch in six months, a goal Mr. Li said was 'quite achievable.'
'When they trade our market, it's our rules. When we trade their market, it's their rules,' Mr. Li said.
The HKEx said it would begin laying out how the mechanism would function in coordination with financial firms in Hong Kong and Shanghai over the coming weeks.
Under the plan, mainland investors with a minimum of 500,000 yuan ($79,950) to invest would be able to trade as much as 10.5 billion yuan of Hong Kong-listed stocks per day, up to a quota of 250 billion yuan.
Investors trading on the Hong Kong market would be able to trade as much as 13 billion yuan per day, up to a total of 300 billion yuan.
Stocks listed on the two exchanges have a combined market capitalization of $5.2 trillion according to data from the World Federation of Exchanges, though their benchmark indexes have underperformed global benchmarks during the past three years. The combined total is more than any other market in Asia, although there is some overlap of dual-listed stocks and not all will be eligible for trading under the plan.
Traders have reacted to the announcement by attempting to arbitrage away any valuation discrepancies between stocks trading at wide gaps on both exchanges.
香港交易及结算所有限公司(Hong Kong Exchanges and Clearing Ltd., 简称：香港交易所)行政总裁李小加(Charles Li)周二表示，沪港股票市场交易互联互通机制试点（简称：沪港通）将成为人民币国际化的重要推动力。
根据世界交易所联合会(World Federation of Exchanges)的数据，在这两个交易所上市的股票总市值达5.2万亿美元，但两交易所的基准指数过去三年表现均弱于全球其他基准指数。沪港股市的市值之和超过亚洲任何一个股市，但会有一些双重上市公司股票市值被重复计算的问题，而且也不是所有股票都将被纳入沪港通计划。