Shenzhen-Hong Kong Stock Connect commenced yesterday, this being the second link between Hong Kong and Mainland Stock Exchanges, which was initially set-up in 2014 between Shanghai and Hong Kong. The benefits of undertaking such a link are likely to be due to the opening of the tech-heavy Shenzhen market to Hong Kong traders, with a total of 881 stocks available to trade on the Shenzhen exchange, as opposed to 417 on Hong Kong’s bourse.
Such a link exemplifies the ‘One Country Two Systems’ philosophy and this may entice buyers who have been reticent to purchase stocks in China to think about doing so using the Hong Kong Stock Exchange as a way of doing this. It is not expected that trading will rapidly increase between the two Exchanges, but this is likely to grow over time, says HKEX Chief Executive Charles Li.
It is likely that the new Stock Connect will generate more interest in Hong Kong to Shenzhen trades due to the larger market and stocks in stable, traditional consumer sectors will be the most sought after, according to Gao Ting, analyst with UBS Securities. Stocks in sectors not represented in Hong Kong will also be of interest, especially companies who have opportunities in the ‘One Belt One Road’ plan, states Liu Xiaoning, an analyst with Shenwan Hongyuan Securities.
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