Stock link benefits go both directions

A spokesman with the China Securities Regulatory Commission (CSRC) announced Friday that exchange authorities in Shenzhen and Hong Kong are studying the establishment of a direct trading link similar to the program connecting stock markets in Shanghai and Hong Kong.

This tentative link has the full support of the CSRC, the spokesman also mentioned.

Many expect a Shenzhen-Hong Kong Stock Connect scheme to be launched early this year. It won't be a simple matter connecting bourses in these two cities, since doing so will require considerable behind-the-scenes work from financial, accounting and legal authorities.

Nevertheless, the two exchanges can benefit greatly from such a connection. Stocks in Shenzhen stand to soar if offshore capital is allowed to invest in local equities. The opening of an additional financial exchange channel with the mainland would also cement Hong Kong's position as the world's leading offshore yuan trading hub.

Obviously, such developments would serve the mainland's current goal of internationalizing its currency. Of course, concurrent improvements also have to be made to mechanisms to repatriate renminbi funds used for offshore investments.