The China Securities Regulatory Commission's decision to permit stock market access between the mainland and Hong Kong is likely to have a far-reaching impact on the Shanghai and Hong Kong bourses. Under the proposed plan, investors from the Chinese mainland and Hong Kong can freely invest in stocks listed in the reciprocal cities.

Under the pre-stipulated quota, qualified investors from Hong Kong can invest in stocks listed at the Shanghai Stock Exchange. At the same time, qualified investors from Shanghai can also invest in stocks listed at the Hong Kong Stock Exchange. The quota, which is currently set at 550 billion yuan ($88 billion) per year, is expected to fluctuate and eventually increase in the long run.

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Bridging Shanghai and Hong Kong, arguably two of the most important financial centers of China for the moment and in many years to come, will create tremendous opportunities.

Be in the offshore renminbi market, the initial public offerings of Chinese companies, or investors' diversified investment choices, Hong Kong provides important complements to both Chinese domestic investors and companies and overseas institutions.

Allowing existing Hong Kong investors to access the Chinese A-share market offers several advantages to Hong Kong. For Hong Kong stocks and the Hong Kong Stock Exchange, such a move can greatly increase the Asian financial center's global competitiveness. Benefiting from the burgeoning economic growth and cross-listing by many Chinese, especially red-chip, high-quality State-owned enterprises, Hong Kong has become a leading financial center for the entire world. Not too long ago, Hong Kong also used to be the global leader in IPOs, thanks to some blockbuster deals from Chinese companies.

However, things are changing rapidly. The tapering of the quantitative easing engineered by the US Federal Reserve has started sending chills into the emerging markets. With the withdrawal of capital, the Hong Kong market has witnessed some substantial drops in market shares.

Closer integration into the Chinese A-share market provides an opportunity to overcome this problem. With the direct-investment channel, not only will international mutual funds and pension funds be given the opportunities to invest directly in the Chinese mainland A-share market without having to take the detour route of qualified foreign institutional investors, but also to anyone with offshore renminbi to invest.