The gap between mainland China and Hong Kong stocks is narrowing as traders piled back into the city’s shares, which are more exposed to names tied to the nation’s economic reopening.
(Bloomberg) — The gap between mainland China and Hong Kong stocks is narrowing as traders piled back into the city’s shares, which are more exposed to names tied to the nation’s economic reopening.
The Hang Seng Stock Connect China AH Premium Index, which tracks the price premium of A-shares to H-shares for dual-listed companies in the two markets, has dropped to its lowest level since February 2022. This is a stark reversal of last year’s trend, when the gauge jumped to its highest since 2009 given investors’ preference for onshore shares which were more resilient to external volatility.
Global investors have been increasing their bets on China’s reopening trade, with shares of travel agencies, airlines and retailers rising as the nation gradually pivots away from its stringent Covid Zero policy. China is set to reopen its borders to international travelers and end quarantine on Jan. 8.
The Hang Seng China Enterprises Index, a gauge of offshore Chinese stocks listed in Hong Kong, has rallied more than 40% from an October low, versus a modest 12% increase for the onshore CSI 300 Index during the same period.
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