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Lu Wenjie, an H-share strategist at UBS Securities, said the pilot program will also help buoy up mainland stocks.

Regardless of the bad performance of the mainland's A-share market over the past few years, there are still some "good-quality" stocks attractive to offshore investors, he said.

"Some consumption and machinery stocks are only available in the A-share market, and I believe their value will draw the attention of foreign investors," Lu said.

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He added that the trial program will discourage speculation and help create a healthy investment environment that centers on value.

The benchmark Shanghai Composite Index surged by 1.38 percent to 2134.3 at its close on Thursday, with brokerages leading the rally.

The gauge index that traces brokerage companies soared by 6.7 percent. China CITIC Securities, the nation's biggest brokerage in market value, grew 9.74 percent.

In Hong Kong, the Hang Seng Index jumped 1.5 percent, hitting its highest close since Jan 2. CITIC Securities gained 9.2 percent and Haitong Securities rose by 7.5 percent.

"It is for sure good news for securities companies, as commission income is to expand largely with the new rule facilitating cross-border stock trading," Rui said.

Li Fei, an independent financial commentator, said the pilot scheme will create new investment channels for the renminbi, helping internationalize the currency.

It will also consolidate Hong Kong's position as an offshore renminbi center, he said.

Jiang Shu, a foreign exchange analyst at Industrial Bank in Shanghai, echoed the view.

"This is a step in China's gradual liberalization of its capital account," he told AFP.

"The authorities will definitely pay close attention to the capital flows between Shanghai and Hong Kong and introduce supportive regulatory measures."

Currently, overseas investors can invest in Shanghai and Shenzhen only through a qualified foreign institutional investors program, or QFII, that grants quotas for A-share investment.

QFII quotas had reached $53.4 billion, and the RQFII quota — which allows foreign institutional investors to use the renminbi to invest in the mainland rather than the US dollar — had reached 200.5 billion yuan by the end of March, according to the State Administration of Foreign Exchange.

Agencies contributed to this story

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