BlackRock Inc, the world’s largest asset manager, is switching a portion of the A-shares in its China fund portfolio into H-shares in view of increased liquidity flows into Hong Kong from mainland China.
The proportion of A-shares in the China equity portfolio will be brought down significantly, the Hong Kong Economic Journal reported, citing Helen Zhu, head of China equities at BlackRock.
Improved fund flows through the Shanghai-Hong Kong Stock Connect program have partly contributed to the surge in the Hang Seng Index and Hang Seng China Enterprises Index recently. In the year to date, the indexes have climbed 15 to 20 percent.
The market situation is prompting foreign fund managers to adjust China stocks’ weighting in their portfolios.
Given the widely-anticipated launch of a new cross-border trading link with the Shenzhen bourse by the end of this year, Zhu said she is gearing up to tap into more small-cap Hong Kong stocks.
Banking, insurance and real-estate counters are among Zhu’s top picks. Makers of steel, iron and cement, as well as wind and hydro power producers, could also be in the basket as their valuations are still low compared with their A-share counterparts.
The price premium of mainland-traded A-shares will continue to narrow, but it will take a long time for the H-shares in Hong Kong to fully catch up, given the limited convertibility of the Chinese currency, Zhu said.
Translation by Vey Wong
– Contact us at [email protected]