Shanghai’s equity bull run may be running out of steam, the Wall Street Journal reported.
Some investors are starting to switch money to Hong Kong, and the premium on the prices of mainland shares over those of their counterparts in the city is shrinking after hitting a three-year high last week.
Company insiders in China are selling their stocks at a rapid pace, the report said.
Mainland share prices soared 53 percent last year as retail investors poured back into the market after years of losses.
In Hong Kong, where Chinese stocks are mostly bought by large international funds, gains have lagged.
“The probability of a rally is very high” in Hong Kong, given it is one of the cheapest markets globally, the report quoted Yuming Ying, managing director at China Eagle Asset Management Ltd., as saying.
On Jan. 7, prices of Shanghai A shares reached a 32 percent premium over those of their Hong Kong-listed H shares.
But that gap narrowed to a 27 percent premium at the close of trading Tuesday.
Big brokers such as HSBC Holdings PLC say the premium for mainland-listed stocks has grown too big and that the “value trade” is to buy Hong Kong shares, the report said.
Last week, Bank of America Merrill Lynch and Deutsche Bank AG downgraded several mainland banking stocks while remaining positive on their Hong Kong listings.
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