Investors should shift to a balanced view of Chinese shares traded on the mainland and in Hong Kong, as the price gap has narrowed to a five-year low and both markets have upside potential, according to HSBC.
The H share discount to A shares among companies that have listings in both locations sank to 18.4 per cent on August 15 before recovering to 20.7 per cent on Tuesday, according to a Hang Seng gauge that tracks the gap. That compared with a five‑year average discount of about 29.4 per cent.
The momentum of both onshore and offshore Chinese equities would continue due to abundant liquidity among domestic investors, improving corporate profitability and policy attempts to prop up consumption, HSBC analysts said.
Retail investors could continue to switch from cash to stocks to chase higher returns, they said, adding that Chinese households sit on US$22 trillion of cash, of which around US$7 trillion was excess savings.
China’s onshore investors have bought US$123 billion worth of Hong Kong stocks this year, marking the biggest inflow since the inception of the cross-border Stock Connect programme.
These investors were keen to gain exposure to China’s largest technology companies, new consumer-economy firms and innovative pharmaceutical manufacturers, HSBC said. Purchasing power towards the onshore market was also on the rise, with daily A-share trading volumes surging to 2.5 trillion yuan (US$349 billion) this month.
