Hong Kong-listed Chinese shares look attractive, said Nomura Holdings in a 9 April report, a day after the securities market turnover reached an all-time high on the Hong Kong stock exchange.
“The rising valuation gap [between A- and H-shares] now makes Hong Kong-listed Chinese shares compelling bargains to onshore investors,” Nomura Holdings said.
On Wednesday, the daily quota also got exhausted for the first time as liquidity from Chinese investors flooded the Hong Kong market.
“Multiple groups of buyers may have together chased the market up, and ETF [exchange traded fund] investors played a role in it as activities under ETFs have picked up,” the firm said.
“We understand that both retail and eligible institutional investors are buying ETFs tracking Hong Kong-listed stocks.”
A recent initiative by the Chinese regulators to allow local mutual funds to invest through the southbound train of the Shanghai-Hong Kong Connect has led to a surge in H-share (China funds listed in Hong Kong) investment.
“Apart from this catalyst, the valuation of Hong Kong stocks is currently at a very low level relative to both global equity markets and to the Hong Kong market historical average. Therefore, Hong Kong equities could continue to catch up,” said Luke Ng, vice president at FE Analytics.
However, one cannot rule out a rise in market volatility, Ng said.
