HONG KONG (AFP) -- China's plan to allow mainland investors to buy Hong Kong stocks for the first time may further boost the territory's market, but analysts fear it could create a dangerous bubble.

China last month announced a pilot scheme to let individuals directly invest in stock markets outside the mainland for the first time, with a trial to be launched to purchase Hong Kong shares.
Beijing hopes the scheme, dubbed the ""Hong Kong stock direct train,"" will help ease some of the excess liquidity on the mainland, and provide a greater choice of investments for the growing number of China's affluent.
The announcement created a frenzy in Hong Kong, with the local bourse recording its biggest one-day point gain in nine years, on expectations that tens of billions of U.S. dollars would soon flood into the city.
Although the scheme has since been delayed as details over minimum investments and which banks will be allowed to offer the service are hammered out, it is still expected to provide a strong boost to the Hong Kong bourse when it is finally introduced.
Raymond So, associate dean in the faculty of business administration at the Chinese University, described the move as a ""milestone"" that will further strengthen Hong Kong's status as an international financial centre.
""When you have more Chinese funds pursuing Hong Kong stocks, this will attract more inflows of money from around the world,"" he said, adding it will also force mainland companies to be more competitive to attract investments.
But despite already fuelling soaring stock prices, which saw the Hang Seng Index cross the 24,000-point threshold for the first time, doubts remain over whether the move would be good for long-term stability without proper regulation. Analysts fear the move could recreate in Hong Kong the volatility of the Shanghai market, which is partly caused by frenetic speculating by individual Chinese investors betting on short-term gains.
""It would certainly be good if the funds are coming to Hong Kong. But it would also transfer the bubble in China to here. You can expect to see more volatility,"" said Ben Kwong, head of research at KGI Asia.
----------Mainland enterprises
Official figures show mainland enterprises accounted for more than half of the total market capitalization here in August, up from 44 percent last year. They also accounted for 71 percent of turnover value in the month, up from 55 percent.
The China factor has helped push the total capitalization of Hong Kong stocks to 18 trillion dollars, up 72 percent year-on-year.
With the same shares in the Chinese companies trading in the Hong Kong stock exchange selling much cheaper in Hong Kong than those in Shanghai, funds are expected to pour in here, which authorities hope will narrow the price gaps.
But Simon Ho, dean of the business school at the Hong Kong Baptist University, expressed fears that the attempts to close the gaps were dangerous, as share prices in China soared higher than their actual value.
Many of the firms are dogged with poor corporate governance and accounting standards, and a lack of transparency, he said.
""People think now that the Chinese investors can come down and invest and so the shares here will rocket. But a lot of these companies can't sustain their current price,"" Ho said.
""If we use the (Chinese) shares as a benchmark, we eventually will see a bubble in Hong Kong, too. That will be a concern,"" he said, adding the Chinese government should implement proper regulations to improve corporate governance.
There is also a fear that Shanghai's market will slump on the flow of money to Hong Kong, which could see some mainland investors -- used to healthy returns on the mainland bourse's exponential rise in recent months -- lose out, a situation Chinese authorities would want to avoid.
Despite the hype, Francis Lun, general manager of Fulbright Securities, believes the Hong Kong market will only see limited gains when the scheme is finally introduced, as mainland investors have already found ways to invest here.
""A lot of people have already taken a submarine here without taking the formal train. So there will be money coming in but it might not be as much as most people thought,"" he said