BUZZ-The China through-train goes both ways
With the valuation differential between Chinese shares listed in Shanghai & Hong Kong hovering around par for nearly three years now, there are signs of growing willingness in Beijing to deepen two-way cross-border investing in equity markets.
** The Hang Seng China Premium index has hovered around 100 on a monthly basis indicating that the 53 dual-listed large-caps that constitute the index are, on average, trading at par. link.reuters.com/zud93v
** Two exceptions were a spike in mainland stocks in November 2011 & a smaller one earlier this year as onshore markets rebounded from their slump.
** Along with this parity, Reorient sees two more compelling reasons to bet on more cross-border equity investments.
** Firstly, the stronger yuan. This is seen by some as evidence that Chinese regulators (SAFE & the central bank) will push forward with opening up the capital account. For another view on the RMB appreciation see
** Then there's the HKMA proposal to remove the HK daily limit on RMB conversion.
** The Shanghai FTZ experiment suggests QDII2 - as the plan to allow mainland residents to invest in HK is dubbed - is likely to begin in China's financial center.
** Reorient expects Beijing to give the green light to QDII2 with an initial quota of $50 billion.
** Short-term implication if all goes through is that real arbitrage opportunities between A & H-shares open up.
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