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Euphoria over China’s SOEs, AI inflate price gap for stocks listed on mainland and Hong Kong bourses to 5-month high

  • The A-shares of 150 dual-listed companies commanded a 42 per cent premium over their H-share counterparts this month, versus a 10-year average of 26 per cent
  • Among the biggest discrepancies, the yuan-denominated stock of China Life Insurance is almost three times as expensive as its Hong Kong stock

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A worker maintains equipment at a China Mobile data centre in Zhongwei City, northwest China’s Ningxia Hui Autonomous Region, in May 2019. Photo: Xinhua
Zhang Shidongin Shanghai

The pricing gap between the mainland China-listed and Hong Kong-listed shares of 150 dual-listed companies has ballooned to the highest level in five months as a frenzy over revaluation of China’s state-owned enterprises (SOEs) inflates yuan-traded shares.

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The mainland-listed A-shares of the 150 companies, including Industrial and Commercial Bank of China (ICBC) and China Mobile, commanded a 42 per cent premium over their counterparts in Hong Kong, known as H-shares, this month, the highest level since December, according to a gauge compiled by Hang Seng Indexes. The average premium over the past decade is 26 per cent, Bloomberg data showed.

Overseas traders remain wary of buying into Chinese SOEs due to concerns about escalating tensions between Beijing and Washington, but onshore investors believe the stocks will benefit from policy tailwinds.

Yi Huiman, the chairman of the China Securities Regulatory Commission (CSRC), said in November that China’s listed SEOs were undervalued and called for a new methodology to value the stocks. The regulator of the state-owned assets, which is in charge of the central SOEs, also pledged in a government work report this year to improve efficiency and benchmark SOEs against the world’s top companies.

A view of the China Securities Regulatory Commission (CSRC) office building located at Beijing’s Financial Street in downtown Beijing on December 18, 2019. Photo: Simon Song
A view of the China Securities Regulatory Commission (CSRC) office building located at Beijing’s Financial Street in downtown Beijing on December 18, 2019. Photo: Simon Song
“The resilience of the onshore A-share market is underpinned by rotation into the SOEs and TMT [technology, media and telecoms] stocks,” said Xun Yugen, a strategist at Haitong Securities in Shanghai. “Investors in Hong Kong are more attentive to fundamentals and are more sensitive to the economy. They generally don’t have much exposure to such thematic investments. Furthermore, the Hong Kong market is more vulnerable to China-US tensions and the banking crisis in the US.”
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