Hong Kong is attracted to mainland capital, not its equities

Six years ago, a widely anticipated policy that was to allow Chinese mainland investors to invest in Hong Kong stocks sent the city's share prices soaring sky high. But the opening of a reverse route is likely to receive the cold shoulder from cross-border investors.  

Allowing Hong Kong residents to trade A-shares won't have much impact on the domestic equity markets, according to Chen Li, head of China equity strategy at UBS. “It only provides alternative investment options such as pharmaceutical companies and companies engaged in Chinese traditional medicine, which are rare in the Hong Kong stock market,” he said.  

However, China’s leading property developers currently trade at an average 2013 price-to-earnings ratio of 7.5 times, which is much cheaper than their Hong Kong-listed counterparts that are quoted at around 10 times. That could potentially make A-share listed property groups attractive to cross-border investors, Chen added.