China’s Shenzhen-traded Equities

By Howie Schwab

The evolution of financial markets in developing countries remains an ongoing process.  Nowhere is this more evident than China, where a series of methodical measures continue to crystallize new investment opportunities. For the first time, in 2015 authorities allowed foreigners access to the local “A Share” market via the Shanghai-Hong Kong Stock Connect program. In December, regulators will begin to liberalize similar channels for investing in Shenzhen-traded equities in China. The Shenzhen exchange boasts over 230 listed technology, media and telecom companies, providing inroads into the “new economy” of China.

As the charts below illustrate, trading liquidity in the local Chinese markets is already substantial. While companies listed on the mainland exchanges typically are more opaque than mainstream Hong Kong-listed securities, limited coverage of the local market suggests that available inefficiencies should provide opportunities for nimble investors. With a few Shanghai-listed investments already present in Driehaus strategies, we look forward to identifying potential opportunities in the Shenzhen market over time.

Exhibit 1:
Average daily traded value (USD, BN)
Exhibit 2:
Number of securities with daily turnover > USD 25 million


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Source: UBS


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