The Shenzhen Stock Exchange (SSE) and Hong Kong Stock Exchange may be linked in the second quarter of 2016, attracting overseas funds flowing into the stock market in the Chinese mainland over the longer term, Gao Ting, head of China strategy at UBS Securities, said in a report sent to the Global Times on Wednesday.
"There's a strong possibility that an official announcement will be made in this quarter to link the Shenzhen and Hong Kong stock exchanges," Gao said, noting that new 505 Shenzhen-listed stocks and 218 Hong Kong-listed ones will be added under that link.
The existing Shanghai-Hong Kong Stock Connect has 266 stocks listed in Hong Kong and 568 listed in Shanghai, according to Goldman Sachs.
After the link between Shenzhen and Hong Kong is achieved, investors in the mainland will have access to at least 84 percent of the total valuation of the H-share market. Meanwhile, 70 percent of the total valuation of the A-share market will be open to the investors in Hong Kong.
"Shenzhen A-shares will be likely to attract fund inflows because of the many private enterprises and fast-growing firms listed there," Gao said, adding that this market will offer more options for overseas investors.
A source from a Shenzhen-based securities firm, speaking on condition of anonymity, said that the "A-share market is more vibrant than the H-share market and aggressive investors will like to invest in A shares."
At the SSE, private companies account for 75 percent of listings, compared with 37 percent at the Shanghai exchange.
Among the private companies listed in Shenzhen, fast-growing industries including information technology, consumer goods and healthcare dominate, accounting for 47 percent of the A-share market.
"Fast-growing stocks will definitely attract overseas investment, of which the Shenzhen-Hong Kong Stock Connect is a good example," said the source.
