Hang Seng China AH Premium Index, why big individual differences ?

[Sig]

Interesting, I'd read the market was hectic in Shanghai early this year, as people hoped to emulate Shenzhen real market's 50+% increase last year and find another fast paying market after the stocks' rout but not yet heard of the divorce thing.
On a side note, in Shenzhen, where on last news I read the real estate price was slightly higher than in Shanghai (this might have changed if Shanghai's on fire), and where regulations on house buying are allegedly not as strictly enforced as in Beijing and Shanghai, not only I've never heard of the divorce thing, but the chatter about house prices is nowhere near the one about the chinese stock market a year or so ago when it went almost vertical before crashing nastily, and where everyone seemed interested and confident to invest in it, even some who had previously no experience in it - not that is not an important and recurrent topic, but since I've started coming here, people I know have been invested in real estate and it's been a major source of wealth.
Otherwise I've had a similar opinion as yours for a few years, prices are too high, and so far have been as misguided as yourself.

I'm still curious to read about why the AH spread is widely different among chinese companies' stocks, and how people with access to both markets deal with it.

I think it's just supply and demand differences between the two groups of buyers/sellers. Since there's no way to arbitrage the two classes, they're really different securities with mostly different buyers and sellers. For whatever reason the outside China pool might really like one stock that's not super popular inside China and vice versa. Even if you took something as benchmark as U.S. Treasury bonds and created an inside and outside U.S. version with no way to arb the two you'd get price divergence, it's essentially two different securities.

 

[dunleggin]

I think most of the reasons mooted here are factors.. To summarise:

• Very different investor bases - and not all of them can readily access both markets.
• Quite different motivations involved in driving stock trading decisions
• Availability and attractiveness of other asset classes in China (the latest fashion/fad/bubble....currently garlic..)
• Execution costs, especially borrowing costs
• The restrictions on movement of capital out of China.
• Regulatory differences, especially as China may arbitrarily move to restrict or ban short selling, or change the rules from time to time.
• Differences in trading price limit rules
• Currency control effects and uncertainties

Therefore, A and H shares aren't truly fungible.

Now, the question is what will be the actual impact from Shenzhen- Hong Kong stock connect scheme when it launches next month, the impact of the new QDII funds, the increasing push by middle-class Chinese to invest overseas

On the other hand, there is also a trend by mainland companies to delist their H-shares and re-list on the A-market

You might also get more granular insights from at least the abstract of this recent study of the Shanghai-Hong Kong Stock Connect

 

[luisHK]

Ok, thanks all for your input, some helpful info about a rather odd situation, I read the summary of your link Dunleggin, need to go through it properly.