(Bloomberg) — The trading discount that Chinese companies listed in Hong Kong offer compared to their mainland peers has fallen sharply, driven by a potential tax waiver and hopes of a market revival on the island.
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The Hang Seng Stock Connect China AH Premium Index, which tracks the price difference between the largest shares listed in both markets, has fallen more than 7%-points this month. Stocks listed on mainland exchanges, known as A-shares, are now trading at around a 40% premium to their counterparts across the border, the lowest since July.
The annual average of the gauge has climbed for four years through to 2023, as investors shunned the market, which had taken the worst of the blows from China’s crackdown on big tech as well as geopolitical tensions.
However, the gap may be poised to narrow further with regulators seeking to promote Hong Kong’s financial status and vowing more measures that would boost liquidity in the market. China is also considering a proposal to exempt a dividend tax on Hong Kong stocks. Mainland investors, who have been enthusiastic buyers of Hong Kong equities this year, may pick up more of their favorite dividend plays, rendered even more attractive if taxes are lifted.
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Jessica Roberts is a seasoned business writer who deciphers the intricacies of the corporate world. With a focus on finance and entrepreneurship, she provides readers with valuable insights into market trends, startup innovations, and economic developments.
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