AI surge helps dual-listed mainland China stocks hit 1-year high premium over Hong Kong
The gap in stock prices for dual-listed Chinese companies trading on the mainland and in Hong Kong has widened to a near one-year high, as state-backed support and renewed enthusiasm for AI bolsters sentiment on yuan-traded stocks.
Shares of the 202 dual-listed companies traded on mainland China’s exchanges – known to investors as A shares – averaged a 23 per cent premium over their Hong Kong equivalents, called H shares, according to a Hang Seng gauge tracking the price differential between the two markets. These companies include most of China’s largest listed firms, such as the Industrial and Commercial Bank of China and electric vehicle battery maker Contemporary Amperex Technology Ltd (CATL).
The price gap – commonly known as the A-H premium – has widened in recent months. Beijing has directed state-backed investment vehicles to directly buy A shares to buffer against global stock sell-offs, while a subsequent revival in the AI sector has boosted domestic tech hardware companies. By contrast, Hong Kong stocks have remained tepid this year because the market has limited exposure to the artificial intelligence supply chain.
A shares have historically been more expensive than H shares, except during severe mainland bear markets such as in 2006 and 2014.
“The A-H premium is a long-term pricing differential in terms of the shorting mechanism, trading costs, liquidity and the foreign-exchange risk on the two markets,” said Yao Pei, an analyst at Huachuang Securities.
H shares were cheaper mainly because of easier short-selling, higher trading fees and more weightings of low-valuation financial stocks in Hong Kong, Yao said.