A LONG-AWAITED stock trading link between Hong Kong and Shenzhen will go live in coming days, the CEO of Hong Kong’s stock exchange said, further opening up China’s capital markets to global investors and giving them access to some of its fastest growing companies.

    With more than 1,800 listed companies that have a combined market capitalization of US$3.3 trillion, the Shenzhen stock market is viewed by analysts as offering tremendous investment potential. HSBC, in fact, calls it the “largest untapped investment opportunity in the world.”

    But sky high valuations and wild swings in Chinese stock prices mean investment flows from Hong Kong into its northern neighbor could take time to materialize. On the other hand, as mainland retail investors seek to diversify away from their home market and put their funds into assets in a stronger currency, Hong Kong may be a key beneficiary.

    “Certainly, I don’t think you will see significant interest in the northbound part of the connect until you have greater optimism about the outlook for domestic equities,” said Richard Titherington, head of the Asia Pacific Equities team at JPMorgan Asset Management.

    The launch of the Shenzhen connect program is expected “in a few more days,” Charles Li, chief executive of Hong Kong Exchanges and Clearing Ltd., said Friday. The move expands an existing trading link between Hong Kong and Shanghai, allowing foreign investors to trade stocks directly in Shenzhen, the world’s second-busiest exchange, from Hong Kong.

    Speaking at the Shenzhen Stock Exchange in the first stop of a roadshow on the mainland to promote the trading link, Li urged mainland investors to diversify their holdings with Hong Kong stocks and joked that with real estate prices in the city so expensive, shares may be a better bet.

    “Mainland residents have a lot of wealth and they need to preserve the value and add value to it, so they have to diversify their investments,” Li said.

    The Shenzhen connect program had been expected to start more than a year ago, but was put on hold after a slump in the Shenzhen and Shanghai bourses, with stocks diving more than 40 percent and the government implementing a series of measures to prop up markets. (SD-Agencies)