Across The Border | Price gap narrows between Shenzhen and Hong Kong stocks ahead of connect plan
The average price gap in 89 stocks that are dual-listed on the mainland and Hong Kong has narrowed to 21 per cent from as much as 46 per cent
The price arbitrage between shares listed in Shenzhen and Hong Kong have narrowed ahead of the imminent launch of the so-called stock connect programme, most likely in late November.
There are 89 companies with shares listed both on mainland China’s stock exchanges and in Hong Kong. The prices of these mainland-listed A shares trade 21 per cent higher on average than their H-share counterparts in Hong Kong in recent trading.
The price gap has narrowed from as high as 46 per cent in February, according to Bloomberg data.
Shares of Shenji Group Kunming Machine Tool, a designer and manufacturer of machine tools, rose to 8.30 yuan (US$1.22) in Shanghai while its H shares closed Wednesday at HK$2.67 (34 US cents) in Hong Kong.
Mainland-listed shares have been trading at a premium to their H-share counterparts since May 2006 as the country’s admittance into the World Trade Organisation five years earlier heralded a new age of economic growth, which spilled over to investments in the country’s equity market.
In August 2007, the mainland authorities considered creating a so-called through-train scheme that would allow its investors to trade Hong Kong shares and vice versa.