Dec 01, 2016

China’s Shenzhen-Traded Equities

By Howie Schwab

China’s Shenzhen-Traded Equities

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)

Source: UBS

Exhibit 2: Number of securities with daily turnover > USD 25 million

Source: UBS

This information is not intended to provide investment advice. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, market sectors, other investments or to adopt any investment strategy or strategies. You should assess your own investment needs based on your individual financial circumstances and investment objectives. This material is not intended to be relied upon as a forecast or research. The opinions expressed are those of Driehaus Capital Management LLC (“Driehaus”) as of December 2016 and are subject to change at any time due to changes in market or economic conditions. The information has not been updated since December 2016 and may not reflect recent market activity. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Driehaus to be reliable and are not necessarily all inclusive. Driehaus does not guarantee the accuracy or completeness of this informa­tion. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

About Howie Schwab

Howie Schwab is the lead portfolio manager for the Emerging Markets Growth strategy and a portfolio manager for the Emerging Markets Small Cap Equity and Global strategies.

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