Chinese dual-listed companies' Hong Kong shares are trading at smallest discount to mainland shares in 15 months.
From South China Morning Post: 2024-05-20 19:30:11
Hong Kong-traded shares of Chinese dual-listed companies are at their smallest discounts to mainland counterparts in 15 months, signaling strong momentum in the city’s $5.4 trillion equity market. The Hang Seng Indexes index tracking price differences between “H shares” and “A shares” hit 133.32 on Monday, the lowest since January 2023.
H shares of 156 dual-listed companies, including Industrial and Commercial Bank of China and Ping An Insurance Group, trade at an average discount of 25% to their mainland shares due to Chinese capital controls. Morgan Stanley raised the Hang Seng Index’s year-end target by 21% on Sunday, projecting it will finish at 19,377.
Foreign investors bought 6.02 billion yuan of yuan-traded shares in April via Stock Connect programs, continuing a three-month buying streak. The Hang Seng Index has surged nearly a third from its January low, outperforming the CSI 300 Index with a 15% gain this year. Expectations of improved corporate earnings have boosted investor confidence.
First-quarter results from Tencent, Baidu, and JD.com exceeded expectations, sparking speculations about Beijing removing a 20% dividend tax on Hong Kong-traded stocks for mainland investors. Among the 156 dual-listed companies, small-cap firms show bigger price gaps with yuan shares significantly pricier than H shares, while the gap for larger companies is smaller.
China’s recent property sector bailout package, announced on Friday, includes a reduced down payment ratio and a 300 billion yuan relending facility for unsold homes. The move is expected to boost Hong Kong stocks by restoring investor confidence. HSBC Jintrust Fund Management believes a stable property market will reduce economic uncertainty and reevaluate equity valuations for further market upticks.
Read more at South China Morning Post: China’s dual-listed companies’ shares show Hong Kong discount over yuan counterparts at 15-month lows