Hong Kong and Singapore on Thursday said they had agreed "in principle" to set up a bubble allowing residents to travel freely between the two financial hubs as long as they test negative for the coronavirus.

The announcement is a rare moment of good news for a tourism industry battered by the pandemic and offers a glimpse into how places with less severe outbreaks might be able to safely restart some travel.

The two cities released joint statements announcing the deal which they said would be implemented within weeks.

"This milestone arrangement will help revive cross-border air travel between the two aviation hubs, in a safe and progressive way," Hong Kong's government said.

"I think it's a significant step, a small step but a significant one because both Hong Kong and Singapore -- we are regional aviation hubs, even global aviation hubs," Singapore transport minister Ong Ye Kung said.

Ong said he hoped the travel bubble could be "a model and a template for us to forge more such relationships and partnerships".

Shares in Hong Kong's flagship carrier Cathay Pacific which, like all airlines, has been hammered by the coronavirus closed more than six percent up on Thursday. Singapore Airlines was trading up a more muted 0.5 percent.

Singapore is one of major source markets of Hong Kong's tourism industry with over 450,000 visitor arrivals recorded in 2019, according to the Hong Kong Tourism Board.

Under a new travel bubble agreement those travelling between Hong Kong and Singapore will need to have a negative coronavirus test result and travel on dedicated planes
Under a new travel bubble agreement those travelling between Hong Kong and Singapore will need to have a negative coronavirus test result and travel on dedicated planes AFP / May JAMES

The joint statement said there would be no limit on what type of travel will be allowed between Hong Kong and Singapore, meaning tourists will be as welcome as business travellers.

Those travelling between the two hubs will need to have a negative coronavirus test result and travel on dedicated planes.

They will not need to quarantine for a period of time on arrival. No transit passengers will be allowed on board the travel bubble flights.

Both governments "look forward to the resumption of travel between both cities, with the necessary safeguards in place to ensure that public health concerns of both sides are addressed," the joint statement said.

Industry groups welcomed the announcement and said they hoped similar bubbles would be formed.

Jason Wong, Hong Kong's Travel Industry Council, said the arrangement -- though welcomed -- wouldn't save the city's tourism industry that has been largely paralysed by the epidemic.

"We would most love to have similar schemes with destinations like Japan, Thailand and South Korea," Wong told AFP.

"Hopefully having the first one would help Hong Kong to convince more partners."

Public health experts cautiously welcomed the Singapore Hong Kong travel bubble but cautioned corridors only worked for those places that have got a handle on the disease.