Hong Kong stocks’ widening discounts leads to increased buying from mainland traders
- Southbound investments via the stock connect schemes in June are headed for the highest level this year
- Gauge compiled by Hang Seng Bank shows that Chinese equities are almost 30 per cent more expensive than their Hong Kong counterparts
Hong Kong stocks now have a potential price catalyst: a widening discount to shares on the Chinese mainland’s exchanges.
Shares of mainland companies that have dual listings were now trading at the most expensive level relative to their stocks in the city in 15 months, according to a gauge compiled by Hang Seng Bank that tracks the price discrepancy between the two markets. The widening gap has already attracted mainland traders, who have been loading up on the cheaper stocks through the exchange link programmes with Hong Kong.
Buying has also accelerated this month. Mainland investors have bought HK$24.8 billion (US$3.2 billion) worth of Hong Kong stocks via the links’ southbound investment channel so far in June, and is headed for the biggest monthly inflow this year, according to Bloomberg data.
Mainland traders were net sellers of Hong Kong stocks in the first two months of the year.
The Hang Seng Stock Connect China AH Premium Index rose to 129.08 this week, the highest level since March 2018. That indicates Chinese equities are almost 30 per cent more expensive than their Hong Kong counterparts. A reading above 100 means mainland-traded stocks trade at a premium and vice versa.