Mainland Chinese investors traditionally had to pay a huge premium for shares listed domestically over what those same shares trade for in Hong Kong. The premium has disappeared. Why?
Prices in Shanghai and Shenzhen have fallen by 22% and 15% respectively this year, making the mainland one of the world’s worst-performing markets. In Hong Kong prices of shares in the same companies have fallen far less. Outsiders appear more willing to believe China’s growth story than the Chinese.
Investors no longer have funds. .Of the US$19bn raised recently by Agricultural Bank of China, more than half came from other Chinese state-owned organisations. Every other big bank is raising more capital. Chinese companies raised $54 billion in equity in the first half of this year (before the AgBank listing) and another $80 billion in debt, according to Dealogic.
The moves to liberalise the yuan could play a part.
But Chinese companies are still trying to list.