New cross-border stock link widens access to China’s Nasdaq

HONG KONG (AP) — Trading began Monday on a new cross-border stock trading link between Hong Kong and the neighboring Chinese city of Shenzhen, the latest step to widen access to China’s markets for global investors.

The new link gives international investors the opportunity to buy and sell high-growth small and midcap stocks traded on the exchange in the southern boomtown of Shenzhen.

Its debut follows the launch of a similar link between Hong Kong and China’s main exchange in Shanghai two years ago.

Hong Kong’s top leader and the stock exchange’s chairman marked the occasion by banging a gong in a ceremony connected by live videolink to their counterparts in Shenzhen, where officials rang a bell to kick off trading.

The market response was muted in early trading, with the Shenzhen All Share index down 0.4 percent while the Hang Seng edged up 0.1 percent.

With a market value of $3.3 trillion, Shenzhen’s exchange rivals Shanghai’s in size. Unlike Shanghai, a center for many lumbering, state-owned enterprises, Shenzhen’s market is dominated by small, fast-growing private companies in up-and-coming sectors such as technology and health-care. Often referred to as China’s Nasdaq, it offers stockpickers a potential new source of hidden corporate gems, analysts say.

Hong Kong, a former British colony, has long been used by Beijing as an offshore outpost for dealings with foreign companies and investors. China’s markets are still mostly fenced off from global capital flows. Foreign access before the links were launched was limited to a quota program for selected fund managers.

Under the Shenzhen-Hong Kong Stock Connect, investors can trade 880 stocks listed in Shenzhen via the Hong Kong exchange. About 200 of those shares on the tech-heavy ChiNext board will be open to institutional professional investors at first.

Mainland investors, meanwhile, get access to 417 Hong Kong small cap stocks. Interest is expected to be high among mainland investors looking to diversify away from assets denominated in the yuan, which has weakened to its lowest level in eight years. Hong Kong stocks are priced in the city’s own currency, which is pegged to the U.S. dollar.