HONG KONG will scrap the daily 20,000 yuan (US$3,264) conversion limit for its residents from Monday when a landmark scheme to link the city’s stock market with Shanghai is launched.

    Regulators said this week the cross-border share trading scheme would start Monday, a crucial step in China’s efforts to open the mainland’s capital markets and to allow Hong Kong residents to choose from a wider menu of yuan-denominated assets apart from bonds.

    While Hong Kong has allowed nonresidents to convert unlimited daily quantities of yuan since 2012, it has capped the conversion limit for residents at 20,000 yuan since 2004, because it wanted to prevent rampant currency speculation.

    The yuan funds for nonresident conversion would draw primarily from Hong Kong’s more than HK$9.8 trillion (US$1.26 trillion) pool of deposits, of which more than half are foreign currency deposits including 945 billion yuan, according to September-end bank data.

    The renminbi is gaining traction among financial institutions and global companies. The yuan was the seventh-ranked global payments currency in August 2014, rising from 13th place in January 2013, according to SWIFT, a global provider.(SD-Agencies)