ETF Trends
ETF Trends

Major News and Events:

Morgan Stanley Sees Mainland A Share Demand Catching Up to Hong Kong Shares

The days of paying different prices for the same stock in Hong Kong and Shanghai are numbered, according to Morgan Stanley.

Valuation gaps between dual-listed shares will disappear as an exchange link, called the Hong Kong Shanghai connect, between the two cities leads to the creation of a “one-China” market, Jonathan Garner, the head of Asia and emerging-market strategy at Morgan Stanley recently told Bloomberg Asia. RMB denominated mainland A shares are valued at a discount of approximately 7 percent versus Hong Kong counterparts as, known as H shares, according to the Hang Seng China AH Premium Index as of August 2014.

“We’re looking for A-H stock price convergence,” Garner said. Over time,the gaps “will effectively come down to zero,” he said.

The Shanghai Composite Index (SHCOMP) has rebounded approximately 11 percent since mid-March on speculation government stimulus will revive growth in the world’s second-largest economy. The SHCOMP has lagged behind a 20 percent surge in the Hang Seng China Enterprises Index (HSCEI) of H shares however. The new connection, scheduled to start in October, will give foreign investors unprecedented access to the mainland market while opening a route for Chinese investors to buy Hong Kong stocks

China Inflation Numbers Benign-Leaving Door Open for More Stimulus

Data from the China’s National Bureau of Statistics (NBS) showed that the country’s consumer price index (CPI) held steady at 2.3 percent year-on-year in July, while the producer price index (PPI) fell 0.9 percent for the 29th consecutive month. Both indicators matched analyst forecasts. Analysts attributed the steady CPI to slides in prices for fresh fruit and vegetables, which offset rises in other categories.

This is viewed as important because benign inflation numbers are another tool to give China’s central bankers wiggle room to adopt more stimulus measures if need be.

China’s consumer confidence rebounds in July

Chinese consumer confidence rebounded for a second month in July on a month-on-month basis amid an upward trend for economic growth, according to the Bankcard Consumer Confidence Index (BCCI), compiled by Xinhua News Agency and China UnionPay, a national bank card association. The index edged up 0.06 points from June to 85.33 points in July.

A higher reading in the index shows a boost in consumers’ desire to spend. A report released along with the index attributed the rebound mainly to rising travel and consumption during the summer. Promotions by businesses also helped.

In July, the spending of bank card users in hotels and plane tickets rose 13.05% and 34.29% from June, respectively, and spending on tickets for large tourist resorts soared 61.81 percent.

The report also forecast that consumer confidence may continue to rise as the government has adopted a number of pro-growth measures, including stepping up construction of affordable housing and infrastructure building.

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