外国媒体看A股

henry

Some Class A Shares in Shanghai
Lose Premium to Hong Kong CounterpartsPing An Insurance
Offers an Example;
Finding a Bottom?
By MICHELLE NG
April 1, 2008

SHANGHAI -- Stocks in China have fallen so much that the Shanghai prices of a few dual-listed shares now are below those in Hong Kong. That batters conventional wisdom about the mainland market and might suggest where a bottom for some of its shares could be found.
In 2006 and 2007, shares on Chinese markets rallied furiously, prompting regular use of the cliché that there were more buyers than sellers. A company's Class A shares listed in Shanghai and Shenzhen were often twice as pricey -- or more -- as the same company's Class H shares listed in Hong Kong.
Two prices for the same stock reflected how investors in the two markets are different, even though the underlying company and the shares are the same. The price premium on the mainland's markets reflected two things: how only a small portion of a company's shares tend to be listed and how few investment channels mainland investors have. In Hong Kong, investors literally have a world of choice as they aren't subject to capital controls, unlike their counterparts on the mainland.
"If I crave a bowl of Chinese beef noodles when I'm in the U.S. and I don't buy because the noodles [there] cost 10 times more, then I'll have nothing to eat. It's the same with mainland investors and A-shares," says Major Teng, manager of Everbright Securities' investment-advisory department.
At present, many Class A shares still trade to a premium to Class H shares. But with tumbling prices on China's exchanges, such a premium has disappeared in a growing number of cases.
One example of how much things have changed is Ping An Insurance (Group) Co. of China. Last week, the price of its Class A shares in Shanghai fell below its Class H shares in Hong Kong. But the picture was sharply different at the end of 2007. The Shanghai-listed shares finished the year at 106.10 yuan (US$15.13) apiece while in Hong Kong they were 83.70 Hong Kong dollars (US$10.76).
On Monday, Ping An's Class A shares closed at 52.91 yuan, compared with HK$55.15 for the company's Class H shares. China's yuan is worth slightly more than the Hong Kong dollar but not enough to explain that difference.
Ping An's Shanghai shares are off 64% from a record close of 144.99 yuan on Oct. 24. Its stock is a bit of a special case since the price has collapsed ahead of the release of 3.1 billion shares that became tradable on the market for the first time this year.
When the company went public in Shanghai a year ago, big institutional holders were barred from selling immediately -- but now that lockup period is ending. Also crucial was the company's plan to sell up to 1.2 billion additional yuan-denominated Class A shares and up to 41.2 billion yuan of bonds, which was approved by shareholders in February but hasn't yet taken place.

Amid the steep fall in the Chinese stock markets and a scramble among investors to find a floor, the Ping An performance has been humbling as the Hong Kong price has been perceived as the floor -- and the fair reflection of its value. When Ping An's Class A shares first fell to the level of the Class H shares early last week, furious bargain-hunting ensued in Shanghai. It continued and the stock even rose 8.5% Friday on near-record volume.
The prospect that Hong Kong lows could be a bottom for Class H shares is a chilling one for mainland investors, because many analysts consider Class A shares to remain 60% higher than Class H counterparts -- even after Shanghai Composite Index fell 34% in the first quarter of 2008. (By comparison, Hong Kong's Hang Seng Index shed 18%.)
In this scenario, the mainland market's biggest stock, PetroChina, draws attention as arguably overvalued. On Monday, the oil giant's shares ended at 17.22 yuan, compared to its Hong Kong price of HK$9.72. Analysts predict further falls for PetroChina, which would hit the broader markets as the stock accounts for 20% of the Shanghai Composite Index.
PetroChina's 2007 earnings, which were released Thursday, were slightly below analyst expectations. But it was the vast price difference between its Class A and Class H shares that sparked last week's selloff, according to Central China Securities analyst Zhang Gang.
An analyst at Industrial Securities, Zhang Yidong, says that Chinese investors "think they can now start buying Ping An again, because its A-share price is lower than its H-share counterpart. On the other hand, they're dumping PetroChina, spooked by the stock's almost 100% premium to its H-shares."
Shanghai Securities analyst Guo Yanling said using the H-share price as a psychological support for the A-shares is somewhat irrational. But she adds that it may take hold among the relatively immature investor base in China.
And an analyst at Southwest Securities, whose name is also Zhang Gang, says: "The H-share price is more like a psychological support, a rough reference point when there is no other form of clear guidance in the immediate future."