China-Hong Kong stock link could spur buying

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Investing in mainland China

The Hong Kong-Shanghai stock exchange link-up is one of the biggest developments in years for investors in international markets.

I told you this morning that beginning Monday, November 17, foreign investors will be able to directly buy individual shares of 560 Chinese mainland stocks. They will be able to do this because there will be a direct link between the Hong Kong Stock Exchange and the Shanghai Stock Exchange.

Bottom line: Anyone who opens a brokerage account with a firm in Hong Kong will be able to own a vast swath of mainland Chinese shares.

U.S. investors have already been able to buy some of the mainland shares through ETFs like the Market Vectors China ETF (PEK) and the Deutsche X-trackers (ASHR), but these are baskets of stocks pegged to indexes, not individual shares. Until now.

Why do we care about this? Because prior to today, the Chinese stocks that were available to U.S. investorsthose that listed in Hong Kong, or those that dual-listed in the U.S. and Chinawere mostly big, state-owned enterprises. Mostly big banks and commodity companies.