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Stock investors in China and around the world will have easier access to hundreds of companies via the Shenzhen-Hong Kong link.
Institutional investors will be able to trade all dual-listed shares and most of the Shenzhen Component Index’s 500 members, as well as small- and mid-cap shares with a market value of more than 6 billion yuan ($904 million). Retail investors won’t have access to the ChiNext board of small firms at the beginning, according to the Securities and Futures Commission. The large number of small-caps in Shenzhen provides an additional opportunity for investors over the Shanghai-Hong Kong connect.
Global investors will gain access to some 870 Shenzhen-listed companies with a combined market value of about 7 trillion yuan via the northbound link, says Ting Gao, the Shanghai-based head of China strategy at UBS Group AG. Those firms include several high-growth technology and pharmaceutical companies in Shenzhen, which typically trade at higher valuations than Shanghai-listed firms. The ChiNext index trades at about 32 times its projected 12-month earnings, compared with a multiple of 13.4 for the Shanghai Composite and 11.9 for the Hang Seng Index.
Here’s what they get to trade:
- Members of Hang Seng Composite Large Cap Index, such as China Mobile Ltd., the world’s largest mobile-services company by subscribers, and energy major Cnooc Ltd., which aren’t listed on the mainland
- Members of the Hang Seng Composite Mid Cap Index, including logistics firm Orient Overseas International Ltd. and developer K Wah International Holdings Ltd.
- Dual-listed firms in Hong Kong, many of which trade at a substantially cheaper price. The Hong Kong-listed shares of ZTE, for instance, trade at 10.6 times their 12-month forward earnings, a 29 percent discount to Shenzhen valuations
- Hang Seng Composite Small Cap Index members with at least HK$5 billion in market capitalization, such as women’s apparel maker Koradior Holdings Ltd., or Bank of Chongqing Co.
