Which Investors Are
Right About Chinese Stocks?
Given today’s global investing environment, many companies list their shares on different exchanges in different countries. Barring any actual differences between the two different listings, such as voting rights, a share of a company traded in one place should trade for roughly the same amount as a share traded in another, and any temporary differences arbitraged away over time. One instance for which that has never really been true: Chinese companies listed in both Shanghai (“A-shares”) and in Hong Kong (“H-shares”). There are several reasons for the differential, but the primary ones have been significant differences in liquidity (until recently, only domestic Chinese investors could buy A-shares) and imbalances of supply and demand for stocks in mainland China. Just three months ago, A-shares were trading at a 10 percent discount to H-shares. But recently foreign investors flooded into A-shares as China further opened up its equity markets, and the tables have turned: A-shares are currently trading at a 13.5 percent premium to their Hong Kong counterparts. From a risk-reward standpoint, Credit Suisse thinks H-shares now have the advantage.
Source: From The Financialist – Presented by Credit Suisse.
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