The devil is in the details for investors

INDIVIDUAL investors on China's mainland will still have to wait for more details before they can directly trade Hong Kong shares although the government has opened the door wider under a new pilot program, the Bank of China said yesterday.

The State Administration of Foreign Exchange said on Monday that it has approved a program to allow private investors to trade Hong Kong shares via accounts opened at the Tianjin branch of Bank of China on a trial basis.

The other branches of BOC, the country's biggest foreign exchange bank, can act as an agent for the services if they have inked cooperation deals with the Tianjin branch.

For instance, Shanghai investors could open an account at a branch of BOC in the city, which will then liaise with the Tianjin branch and therefore saves them from having to be present at the Tianjin branch personally.

However, more details like the timeframe of the opening-up and when the service will start have not been disclosed, said Wang Zhaowen, a BOC spokesman.

Within a month

The lender has "recently" submitted the application for the business to the China Banking Regulatory Commission and more details will be available when approval is given, Wang said, although he declined to give a date.

The service may be offered in Tianjin within a month once all procedures are ready, said Hong Kong-based BOC International Holdings Ltd yesterday. The broker will arrange the stock trading in Hong Kong.

The amount of forex purchase under the program is not limited by the annual US$50,000 quota. This means individuals can buy whatever amount they want. But SAFE, the forex regulator, has also asked BOC to monitor big-sum stock transactions of more than HK$5 million (US$641,000) a month by a single investor.

The latest move, viewed as a big step forward in China's capital account opening, will help channel the country's rising forex reserves and boost the Hong Kong stock market.

However, it may not deal a serious blow to the yuan-backed A share market though a short-term psychological impact is possible, Jiang Jianrong, an analyst at Shenyin & Wanguo Securities Co, said.

Hopes of an appreciating yuan and the sparse knowledge about the Hong Kong stock market will prevent a huge forex outflow through the program.