Hong Kong firms in China charm-push ahead of Hong Kong-Shenzhen investment link

Sat Nov 19, 2016 11:22pm EST
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By Samuel Shen and John Ruwitch

SHANGHAI (Reuters) - Scores of Hong Kong-listed companies - many small - are on a roadshow blitz in China to whet the appetite of mainland investors ahead of the launch of a cross-border investment 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 dollar.

"Valuations of Hong Kong stocks are very low. In addition, the Hong Kong dollar is pegged to the U.S. dollar, so when you buy Hong Kong dollar assets, you're actually buying into the U.S. dollar," Ma Hong, general manager of Shanghai TopFund Investment Management Co, said at an event in Shanghai promoting the Hong Kong-Shenzhen Connect trading link.

"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 the head of Hong Kong Exchanges and Clearing Ltd (0388.HK: Quote) 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-to-Hong Kong link allows investment in 318 bigger Hong Kong-listed companies.

Since the Shanghai link opened two years ago, Chinese investors have bought a net 294.7 billion yuan ($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.

The southbound money flow has halved the premium that Chinese listed shares had over Hong Kong shares this year alone.   Continued...

Passers-by walk on a footbridge in front of the Shenzhen Stock Exchange, China January 5, 2011. REUTERS/Bobby Yip/ File Photo