(China Alert) Shenzhen Connect: Fashionably late

-The Shenzhen-Hong Kong Connect is set to launch by the end of the year
-Through the Connect, foreign investors can access the world’s second-largest equity market
-A wider range of stocks is only the beginning with instrument expansion in the cards

Update: After rampant speculation and prolonged silences, China’s securities regulator has now announced the Shenzhen Connect with four months to go live. Obviously, a wider range of stocks to buy has caught people’s attention. However, it’s not what companies are now available that matters most; it’s how managers navigate this new China landscape. Effective immediately, the Connect will no longer have aggregate quota limits – this also applies to the existing Shanghai link which, as of yesterday, stood at 82% and 50% of north- and southbound quota usage respectively. In fact, the trading mechanism should be the same across both Connects. More importantly, Z-Ben Advisors believes the launch of the Shenzhen Connect is another step along the road toward quota-light cross-border access with remaining dominos to fall before the end of the year.

Neither R/QFII nor the Connect is perfect. However …

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