The apparent dismissal of proposals to link the Hong Kong and mainland stock markets as infeasible by Hong Kong Exchanges and Clearing Chief Executive Paul Chow Man-yiu might seem most discouraging to the government officials and economists who have shown great enthusiasm and support for the idea.

His remarks were seen in Hong Kong as a refutation to a suggestion made earlier by Fang Xinghai, deputy director of the Shanghai government's financial services office. Fang recommended that a platform be created to trade shares in the 38 companies dually listed in Hong Kong and Shanghai.

But it is wrong to see Mr Chow's comments as entirely negative. He was quoted by Hong Kong media as saying that unless the yuan is fully convertible, stocks in the two places cannot be freely circulated. However, he added that expanding the existing QDII, or qualified domestic institutional investors, and QFII, qualified foreign institutional investors, mechanisms could be the foundation for such a link.

That was more or less what Hong Kong Monetary Authority chief Joseph Yam has been saying all along. In one of his recent essays, Mr Yam, a strong proponent of the link, wrote that a merger of the two stock markets isn't an option in the present regulatory environment.

Acknowledging the hurdle posed by the restrictions on currency convertibility, particularly in the capital account, Mr Yam contends that it is still feasible to establish a channel that "would have the effect of pooling the various financial markets of the two jurisdictions, providing much greater liquidity and much more efficient price discovery".

As an illustration of how such a channel could be built, Mr Yam cited the use of the QDII and QFII schemes. He also noted the possibility of creating derivative instruments for trading in both markets with an arbitrage mechanism to equalize prices.

It is obvious that efforts to establish any form of link between the two markets must be initiated by the respective government authorities because it would invariably involve a host of regulatory issues. It is not surprising for people in the private sector to remain skeptical because their money could eventually be put at risk.

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