STEPHEN QIN, a 28-year-old office worker in northern China, traveled 1,000 miles and set up an account in Hong Kong to trade Chinese mainland stocks he could have bought at home.

    The money of thousands of mainland investors is doing a similar round trip, flowing into brokerages in Hong Kong and then returning to the mainland via share purchases through the city’s stock connect with Shanghai.

    Why? It’s cheaper. Discounts on trading commissions, lower margin-finance charges — even reimbursement for airfare — make Hong Kong’s securities firms look like a bargain compared with those on the mainland. Mainland investors can also borrow higher amounts for trading than at home.

    “I’ve done my research and realized it’s quite a fantastic opportunity to trade stocks with a Hong Kong brokerage,” said Qin, who lives in Jincheng in Shanxi Province. “It’s definitely cheaper to trade with a Hong Kong brokerage now.”

    As mainland brokers tighten margin financing amid increased regulatory scrutiny, Hong Kong securities firms are finding a niche catering to mainland investors. Amid the world’s biggest stock rally, a 141 percent one-year gain, the business presents a means to compete with bigger mainland rivals who have been expanding in the city.

    Bright Smart Securities and Commodities Group Ltd., where Qin does his trading, has about 15,000 accounts belonging to mainlanders, and about half of their money is now invested in A shares traded in Shanghai, said Nelson Chan, chief executive officer. Business from mainlanders has surged 10 times since the opening of the stock connect, he said.

    The brokerage promises to reimburse as much as HK$10,000 (US$1,290) for travel costs to Hong Kong, with advertisements that read: “We promise it’s cheaper than on the mainland.”

    It’s also offering commission-free trading and cheaper loans for margin financing. At least a dozen other Hong Kong brokerages, including Luk Fook Financial Services Ltd. and Chief Securities Ltd., have been offering various similar incentives. About a quarter of the 449 brokerages doing business in Hong Kong are approved to trade mainland A shares.

    As many as 40 mainland brokerages in Hong Kong may be channeling mainlanders’ money into A shares from accounts in the city, though they’re less aggressive than Bright Smart in offering incentives, said Jeffrey Chan, chairman of Hong Kong Securities Association Ltd.

    The brokerage business of the Hong Kong unit of Bank of China Ltd. is waiving fees and offering cheaper margin loans for some customers, while Guotai Junan International Holdings Ltd., Haitong International Securities Group Ltd. and Shenwan Hongyuan HK Ltd. are also providing cheaper loans without waiving commissions.

    Investors in Hong Kong, including mainland visitors, have put 153 billion yuan (US$25 billion) into Shanghai-traded equities since the Central Government began allowing purchases through the link in November.

    Charles Li, CEO of Hong Kong Exchanges and Clearing Ltd., said he was unaware of how much money originated in Hong Kong or how much was round-tripping from the mainland.

    “These are just investors in Hong Kong, and I don’t care how they’ve got here,” he said. “Why would I single them out?”

    The mainland’s foreign exchange rules cap the maximum amount of yuan that individuals are allowed to send abroad at US$50,000 each year. Most of the mainlanders seeking to open accounts already have money deposited in Hong Kong bank accounts, said Chan of Bright Smart.

    While mainland brokerages charge interest rates of more than 8 percent for margin financing, the levels are lower in Hong Kong. (SD-Agencies)