China A-share premiums seen narrowing to 15-20%

April 13, 2015 11:53
The valuation gap between Hong Kong-listed H-shares and mainland-traded A-shares will narrow, says Anthony Wong of Allianz Global Investors. Photo: HKEJ

The spreads between the prices of A- and H-shares will continue to shrink until the premium on A-shares will fall to just around 15 to 20 percent, according to a top Chinese fund manager based in Hong Kong.

Anthony Wong Sui-ki, who oversees a China A-shares fund for Allianz Global Investors, said he is upbeat about the prospects for Hong Kong-traded H-shares, given the current large valuation gap with regard to mainland-traded A-share peers, the Hong Kong Economic Journal reported Monday.

The uptrend in H-shares is likely to sustain on the back of liquidity flows into Hong Kong after Chinese authorities allowed mutual funds with no authorized quotas to invest through the Shanghai-Hong Kong Stock Connect, Wong said.

The Hang Seng China AH Premium Index, which tracks the average price difference of A-shares over H-shares for the largest and most traded stocks, had risen to 135.72 on March 26 from 102.14 on Nov. 17, 2014 when the stock link was launched.

The index shows that a 35.72 percent premium exists in the A-share markets. But the trend reverted after the stock link was expanded to reach mutual fund investors on March 27.

As of last Friday, the index had seen the premium narrow to 23.35 percent, compared with a 10-year historic average of 16.11 percent.

The premium in A-shares is partly due to the large liquidity in the mainland market and the high sensitivity of individual investors to policy changes, Wong noted.

Translation by Vey Wong

[Chinese version 中文版]

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