Small-Mid Cap China Property Stocks to Benefit from Shenzhen-Hong Kong Connect

The upcoming Shenzhen-Hong Kong Stock Connect program will significantly broaden the range of Hong Kong Stock Exchange listings available for convenient purchase through mainland Chinese brokerage accounts.  Background:

Key facts:

  • Expected launch in the second half of November following testing
  • HK securities eligible purchase will include all constituents of the Hang Seng Mid-Cap Index and all constituents of the Hang Seng Small Cap index with average daily market cap over HK$5Bn in the prior 12 months (link to index constituents)

Chinese property developers listed in Hong Kong are likely to see significant demand:

  • High visibility – Residential property development has a high public profile in China.  Investors are familiar with the industry and individual companies.
  • Low valuation of Hong Kong listings relative to companies trading in Shanghai/Shenzhen at an average P/E over 15, P/B over 1.8, and yield about 2.2%

Potential Beneficiaries:

hk-small-mid-property-companies-092816

 

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