News of the pilot program, announced by the State Administration of Foreign Exchange, helped send Hong Kong shares up 5.9%. Many analysts believe the broadening of options for Chinese investors could lead them to put more money in Hong Kong stocks, such as China Mobile (Hong Kong) Ltd. and Cathay Pacific Airways Ltd.-and possibly less in domestic shares traded in Shanghai and Shenzhen.

"Although there are limits, this is a historic move in China's capital-account opening," said Stephen Green, an economist with Standard Chartered in Shanghai.

With local investors pouring money into Chinese stocks this year, prices have risen to a steep premium to those in Hong Kong, even though the same company often lists shares in both domestic and offshore markets. Hong Kong's benchmark Hang Seng Index is up 8.2% this year, far short of the 83% surge by the Shanghai Composite Index.

Opening Hong Kong to Chinese investors "will help narrow the price gap between the Hong Kong-listed H shares and the mainland-listed A shares," said Hong Kong Exchanges & Clearing Ltd., the operator of Hong Kong's stock market, in a statement.

"Domestic income levels have risen and demand for diversified investments has increased," the State Administration of Foreign Exchange said in a statement.
"This is an important policy to widen the channels for outflow of foreign exchange and encourage a balance of international payments."

Investors who want to take advantage of the trial program must open accounts at Bank of China Ltd.'s branch in Tianjin, a northern port city near Beijing, and the bank's Hong Kong brokerage arm, BOCI Securities Ltd. Tianjin has been designated as a trial area for some financial overhauls, but in practice investors elsewhere in China will also be able to open accounts there.

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