Twice as good: Shenzhen-Hong Kong link offers overseas investors access to tech firms
Shenzhen-Hong Kong Stock Connect is poised to give mainland and overseas investors greater choice and ‘increase investment options in terms of technology and start-up companies’
The Shenzhen-Hong Kong Stock Connect, expected to begin trading in late November, signifies a major step taken by mainland China in the liberalisation of its capital market.
Specialists at leading accounting firms say the scheme complements the Shanghai-Hong Kong Stock Connect.
The launch of Shenzhen-Hong Kong Stock Connect is expected to be an exciting opportunity for overseas and mainland investors.
Eddie Wong, partner of capital markets services at PwC Hong Kong, says the companies listed on the Shanghai Stock Exchange tend to be large financial institutions and state-owned enterprises, while Shenzhen Stock Exchange is a hub for technology companies.
“As many of these technology companies are not listed in Hong Kong and are otherwise inaccessible to overseas investors, there will be a wider range of stocks available to overseas investors. The additional trade volume and liquidity should help drive up the value of the stocks and help restore value and investor confidence to China’s capital markets.”
After abolishing the aggregate quota system, the stock connect schemes have become more open, sending a message to investors that China’s capital markets will be governed by the laws of supply and demand, which will encourage overseas investors more familiar with free-market stock exchanges, he says.
Wong says: “The addition of a new stock connect scheme also means the daily quota has effectively doubled, meaning mainland investors have more flexibility to invest in the Hong Kong market and gain access to many mature and sizable companies with stable dividend yields.”
