HONG KONG (AFP) – Hong Kong’s de facto central bank said Wednesday it would lift a daily cap for converting the local currency to Chinese yuan to facilitate a trading link between the city’s bourse and Shanghai’s stock exchange.
The southern Chinese city’s exchange on Monday announced the launch of a delayed link-up with Shanghai to start November 17, which is expected to allow the equivalent of US$3.8 billion a day in cross-border transactions.
It was a move seen as a step towards greater financial liberalisation in the world’s second largest economy.
Hong Kong’s Monetary Authority chief Norman Chan told reporters Wednesday: “The Renminbi conversion limit for Hong Kong residents of 20,000 yuan ($3,263) a day will no longer be available… effective on Monday.”
Analysts say the lifting of the limit will bring easier access to Renminbi for local residents and encourage investors to use the currency.
“This is a very key technical resolution for the Shanghai Hong Kong Stock Connect,” Jackson Wong, Simsen International Financial Group associate director, told AFP.
“Residents can get cash quickly to buy whatever amount of mainland shares, the hurdle will be cleared,” he said.
Currently, local residents can only convert Renminbi from Hong Kong dollars worth 20,000 yuan a day.
The rule was established in 2004 when the city allowed local banks to accept strictly regulated yuan for deposits.
Chan also said the new arrangement would make it more convenient for locals to buy shares listed in Shanghai and other financial products denominated in yuan.
“This will facilitate the launch of RMB investment products by financial institutions in Hong Kong,” he said.