Chinese mainland investors who flew to Hong Kong for lower prices of H-shares of dual-listed companies have found A-shares for listed banks are now cheaper than their Hong Kong counterparts.
It showed the A-share banks were reasonably priced, even though it is still taking time for a return of investor confidence in the sector, analysts said yesterday.
The Industrial and Commercial Bank of China, Bank of China, Bank of Communications, China Construction Bank, China Citic Bank and China Merchants Bank are listed on both Shanghai and Hong Kong markets.
Of those, five banks' A-shares - excluding Citic Bank - are already priced less than or close to the price listed for their Hong Kong-counterparts. Merchants Bank ended at 23.68 yuan (US$3.47) in Shanghai yesterday. Its H-share ended at HK$27.3 (US$3.50).
"The Hong Kong market is a matured one with free flow of capital," said Zhang Yan, a Datong Securities Co analyst. "The lower price of A-shares signals the A-share market's investment value."
Last year, retail investors rushed to Hong Kong to open accounts to buy H-shares when the H-shares were about 20 percent cheaper than the A-shares of the dual-listed companies.
Slow-down
However, the A-share market dropped heavily this year on concerns of economy slow-down, high inflation and over valuation.
Listed banks are among the worst hit sectors as they are under direct impact from the tight monetary policy, including the reserve requirement ratio increases.
"The concerns over higher lending costs has translated into the tumbling of listed banks' shares," said Zhang. "The market over-reacted."
Zhang maintained the "buy" rating on listed banks based on an expectation of rising profits for mainland banks.
Banks including Shanghai Pudong Development Bank, Merchants Bank and Citic Bank have said they expect juicy first-half profits - some as much as a 150 percent year-on-year increase.
She Minhua, a China Securities Co analyst, said investors remained cautious on stock investments due to uncertainty in the economy.
"The risk is relatively low now," She said. "However, it still takes time for investors to strengthen confidence."
