Wednesday, 1 October 2014

Hong Kong Is Losing Premium Over Shanghai’s Stock Market - Bloomberg

This article linked below -- to which I assume you were referring when you mentioned the parity of HK and Shanghai exchanges -- is duplicitous.

The Hang Seng AH China Index which tracks difference between A and H shares shows that Shanghai's A shares have been trading at a PREMIUM of average 80%, at times up to 100%, to Hong Kong's H shares since inception. Reason being that China so controls its capital account that Chinese can invest only in China shares, and pent-up demand drove the A-prices higher. These capital controls are not going to be eased soon. Alibaba considered only NY and HK. Not SH or SZ.

In recent times the A-H premium has dropped and gone positive to H-shares to tune of about 12%. That's just because the Shanghai exchange has performed so poorly.

Therefore, coming (back) to parity is not news. It's just business as usual. It could go back to Shanghai's A shares being 80% ABOVE HK's H-shares and that would just be normal. What WOULD be news is if H-shares again went to positive premium, not the reverse.

The Bloomberg article ignores all of this context.

That's why I say it's duplicitous.

Sent from my iPad