The opening of the Shenzhen-Hong Kong Stock Connect on December 5 will mark a new era in Chinese equity investment, according to fund managers.
The scheme, which will recreate a stock trading link between Shanghai and Hong Kong that went live two years ago, will improve international access to 881 Shenzhen-listed equities, according to the mainland and Hong Kong regulators. Investors on the Shenzhen exchange will be able to buy 417 stocks in Hong Kong.
"The programme opens up a new chapter of free access to a highly liquid market," says Karine Hirn, partner at emerging markets investment firm East Capital.
Fund managers are excited about the new stock link because the Shenzhen exchange is home to many small-cap stocks in sectors such as technology, healthcare and consumer goods. In contrast to the many state-owned enterprises listed in Shanghai, a high proportion of Shenzhen-listed stocks are relatively young companies founded by Chinese entrepreneurs.
"Private companies tend to be more efficient and profitable, and they constitute over 70% of the Shenzhen market," says Hirn.
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