Chart of the day: H-share punishment halfway over?

Downbeat perceptions of mainland equities have hurt their Hong Kong-listed counterparts, where most international investors get China exposure, relative to the domestic A shares that have rallied strongly since the start of the Shanghai-Hong Kong Stock Connect scheme. Data tracked by EPFR suggests that US$10 billion has been hauled from China funds, most of that H shares, since October. That is about 4 per cent of the total asset base, according to Daiwa Capital Markets strategist Ma Jibo. But while H shares have underperformed on a relative basis, they have started to rally again despite the funds outflow. The question is how long before funds return, especially with international asset allocation to China shares now way below its historical 2 per cent overweight at 0.74 per cent underweight. "We can compare the current fund outflows with the worst scenario in history, from March 2013 to April 2014, when the fund outflow was as large as US$17 billion. On this basis, we feel comfortable in saying that we are about halfway through this process," Ma says.