Hong Kong's embattled pro-Beijing leader announced Wednesday she will permanently shelve a loathed extradition bill that lit the fuse for three months of pro-democracy protests which have plunged the city into crisis.

"The government will formally withdraw the bill in order to fully allay public concerns," chief executive Carrie Lam said in a video statement released via her office.

Earlier in the day, reports that an announcement was imminent sparked jubilation on the city's stock market, which soared four percent in afternoon trade, as hopes rose that Lam and Beijing may finally be willing to offer a political solution after weeks of refusing to make any concessions.

News that some sort of announcement was due first began to emerge around lunchtime on Wednesday when pro-establishment lawmakers said they had been summoned to meet Lam. 

One lawmaker, who asked to remain anonymous, told AFP their camp had been asked to meet the city's leader at 4pm (0800 GMT) ahead of an expected major announcement.

University students hold a pro-democracy protest in Hong Kong. Photo: AFP

Reports then emerged that a full withdrawal to the bill was on the cards.

"This gesture to formally withdraw is a bid to cool down the atmosphere," the South China Morning Post quoted one source as saying.

That speculation sparked a frenzy on the stock market which has been battered by both China's trade war with the United States and Beijing's refusal to find a political solution to the weeks of protests in the international financial hub.

The blue chip Hang Seng index was up around four percent by the end of the afternoon.

The city's hugely influential property sector - which had tumbled more than 20 percent since April - also saw massive gains with the HSI Property Index jumping more than six percent after the reports.

Beijing defiant 

Semi-autonomous Hong Kong has been hammered by three months of huge, sometimes violent, protests that were initially sparked by a plan to allow suspects to be extradited to the Chinese mainland.

The protests evolved into a wider democracy campaign involving clashes between protesters and police, in the biggest challenge to China's rule of Hong Kong since its 1997 handover from the British.

For the last three months both Lam and Beijing have refused to compromise beyond agreeing to suspend the bill, a move that fell far short of demands that it be permanently withdrawn.

Hong Kong's business community widely disliked the extradition proposal and looked on aghast as the usually stable city became mired in increasingly violent street battles between riot police and a minority of hardcore protesters.

For much of the last three months Lam has struck a defiant tone, appearing either unwilling or unable to make any concessions.

On Tuesday she insisted she had no plans to resign after an audio recording emerged of her telling business leaders she wanted to quit but was hamstrung by Beijing, which now viewed the protests as a national security and sovereignty issue.

While a full withdrawal of the extradition bill early on in the protests may have placated some protesters, the movement has since made many more demands, including an independent inquiry into alleged police brutality, an amnesty for those arrested and calls for Hong Kongers to be able to directly elect their leaders - a major red line for Beijing.

Online message forums used by the largely leaderless movement to organise were filled angry comments saying a withdrawal of the bill would not end the protests. 

"More than 1,000 people have been arrested, countless injured," one widely shared message on the Telegram messaging app read.

"Five major demands, not one less. Liberate HK, revolution now," it added.