HONG KONG will lift the daily conversion limits for residents now capped at 20,000 yuan (US$3,257) before a landmark program to connect stock markets between Hong Kong and Shanghai gets under way next month, Norman Chan, head of the Hong Kong Monetary Authority, said yesterday.

    While it has allowed non-residents to convert unlimited daily quantities of yuan since 2012, it caps the conversion limit for residents primarily because it wanted to prevent rampant currency speculation among residents, analysts said.

    Authorities expect the landmark stock connect program between Shanghai and Hong Kong — another step in China’s efforts to open up its markets — will launch in October and fuel more demand for yuan assets. Regulators and market participants are racing to test mechanisms to ensure readiness.

    The program will allow, for the first time ever, qualified investors to buy and sell shares listed on the Hong Kong stock exchange and the Shanghai Stock Exchange respectively, subject to quotas.

    The program will loosen restrictions on capital flows in and out of China, representing a move toward the long-awaited opening of China’s financial markets. It also paves the way for future mutual market access connections with other exchanges such as the Shenzhen Stock Exchange. (SD-Agencies)