Scores of Hong Kong-listed companies, many of them small, are drumming up investor interest in the mainland ahead of the launch of a cross-border stock trading link between Shenzhen and Hong Kong.
Mainland investors are enthusiastic, viewing the cross-border channel as a way to buy relatively cheap growth companies and hedge against a rapidly falling yuan, which hit an eight-year low on Friday against the US dollar, Reuters reports.
“Valuations of Hong Kong stocks are very low. In addition, the Hong Kong dollar is pegged to the US dollar, so when you buy Hong Kong dollar assets, you’re actually buying into the US dollar,” Ma Hong, general manager of Shanghai TopFund Investment Management Co., said at an event in Shanghai promoting the Hong Kong-Shenzhen Stock Connect.
“For us, the Hong Kong market represents a strong currency plus cheap assets … we need to embrace it.”
China and Hong Kong have not specified when the link would open, but Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing Ltd. (0388.HK) said on Friday it would go live “in a few more days”.
The link would allow Chinese investors access to about 100 smaller companies listed in Hong Kong. The existing Shanghai-Hong Kong stock trading link allows investment in 318 bigger Hong Kong-listed companies.
Since the Shanghai link opened two years ago, mainland investors have bought a net 294.7 billion yuan (US$42.8 billion) of Hong Kong shares, more than double the purchases of Shanghai shares by Hong Kong, highlighting the more lukewarm interest of foreign investors in Chinese shares, Reuters said.
The southbound money flow has halved the premium that Chinese-listed shares had over Hong Kong shares this year alone, the report said.
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