SEOUL, April 8 (Korea Bizwire) — Funds that invest in Chinese stocks have soaked in money in South Korea as investors were flocking to the mainland equities ahead of the launch of a new trading scheme connecting Shenzhen and Hong Kong, data showed Wednesday.
Mainland Chinese stock funds have drawn a net 675 billion won (US$616.2 million) this year, accounting for 86 percent of net cash inflows into foreign stock funds, according to the data compiled by the Korea Financial Investment Association (KFIA).
Most of the Chinese funds were directly invested in shares listed on ChiNext, a NASDAQ-style board of the Shenzhen Stock Exchange, which is one of the three major stock exchanges along with bourses in Shanghai and Hong Kong.
The cash inflows reflect high interest in the Shenzhen Stock Exchange as it is set to begin a trading scheme in which it connects with the Hong Kong Stock Exchange later this year to complement the Shanghai-Hong Kong stock link launched in November, which mainly features large-cap shares.
With rising hopes for broader access to the Chinese equity markets, Korean brokerage houses have launched several funds that bet on the high growth of burgeoning Chinese tech companies.
Samsung Asset Management in June launched a fund that focuses on small- and mid-cap Chinese shares, and it has drawn a net 131.9 billion won this year to reach 206.9 billion in total assets.
The Seoul-based asset manager said it temporarily stopped raising subscriptions since late March after the fund exceeded the asset target.
“Retail investors paid keen interest in the Shenzhen Stock Exchange on rising expectations that the stock scheme with Hong Kong may begin later this year,” an official at Samsung Asset Management said.
The Shanghai Stock Exchange Composite Index, the mainland benchmark index, has risen 22.5 percent this year, while the Shenzhen composite index has spiked 50 percent. In the same period, the ChiNext index soared 73.7 percent to outperform other mainland markets after Beijing pledged to expand investment in new economic drivers to shift its reliance on heavy manufacturing and real estate development.