Chart of the Week: China share gap narrowest in eight months
Weiyi Lin, Allen Wan and Richard Frost
Chinese companies traded on the mainland are priced at the smallest premium to Hong Kong-listed counterparts in eight months, a sign that local investors are becoming more bearish than foreigners on the nation's equities.
The chart of the week shows yuan-denominated A-shares in Shanghai and Shenzhen are only 1 per cent more expensive than their dual-listed counterparts in Hong Kong, according to an index from Hang Seng Bank. That premium is the narrowest since February 17 and was at 23 per cent a year ago. The lower panel shows performances of the CSI 300 Index, the MSCI All-Country World Index and the MSCI China Index of mostly Hong Kong-traded stocks over 12 months.
"Local investors aren't optimistic A-shares will gain in the next one to two years," said Zhang Gang, a strategist at Central China Securities in Shanghai. "Hong Kong-listed Chinese shares track global markets much more than mainland equities."
The CSI 300 has fallen 9.7 per cent in the past 12 months as the government struggles to reverse an economic slowdown. The MSCI China Index has climbed 14 per cent, matching the advance by MSCI's global index. Yuan-denominated shares are restricted to domestic investors and a few foreign institutions. Their Hong Kong counterparts are open to overseas investors.
A third year of equity losses has spurred mainland investors to empty trading accounts. The number of Chinese stock accounts containing funds dropped by 1.1 million to 56 million in the year to September 28, the most for a 12-month period.
Mainland investors are barred from directly trading overseas shares. The stock index has declined 0.6 per cent this year after tumbling 34 per cent in 2010 and 2011.
The MSCI World Index has climbed 10 per cent this year as central banks added stimulus to counter a global slowdown. The world economy will grow 3.3 per cent this year, the slowest since the 2009 recession, the IMF said recently. The lender cut its full-year estimate for China by 0.2 percentage points to 7.8 per cent, which would be the weakest rate since 1999.