Mainland Markets Trump Hong Kong

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China’s surging stock markets, have now overtaken Hong Kong in terms of market capitalisation, according to the FT.

    “The Shanghai and Shenzhen markets overtook Hong Kong on Monday while the market was closed, according to figures on the Stock Exchange of Hong Kong website, and maintained that position after it resumed trading yesterday…The market capitalisation of the mainland markets reached $1,800bn yesterday, overtaking Hong Kong’s $1,772bn at the time of closing.”

While the champagne corks may be popping (and the bai jiu caps unscrewing), there are continuing fears of a market bubble on the mainland.

    “Steven Sun, equity analyst at HSBC in Hong Kong, cautioned that the sharp run-up in mainland share prices in recent weeks meant that the market was approaching “bubble-level valuations”…Shares on the mainland market were now valued at 28 times 2007 earnings, he said, compared with 16 to 17 times for the MSCI China index, which covers China and China-related companies listed in Hong Kong and New York.”

But the party looks set to continue, and PwC are said to have predicted that the Shanghai market will raise more money than Hong Kong this year. On this theme, and in another blow to Hong Kong, it is reported that Hong Kong may have its flow of mainland companies restricted to those seeking over US$1 billion, or having a simultaneous listing on the mainland.

    “Bankers say Beijing has introduced an unofficial policy designed to force a large majority of listing candidates to become A-shares by joining the Shanghai or Shenzhen bourses rather than list in Hong Kong…Policymakers believe that increasing the numbers of listed A-share companies will help to mop up excess liquidity and prevent a stock market bubble in China.

The markets are hard to predict (unless you are privy to inside information, of the sort that can be picked up from well-connected investors, friends of mistresses of securities company bosses, or other colourful sources). One prediction, however, is pretty safe – that the Chinese stock markets, already proven to “shake the world” , will be a permanent feature in the news. The question is: will it be good news…or bad?

See news sources:

    Mainland pair beat HK’s market cap
    By Geoff Dyer in Shanghai
    Published: April 11 2007 03:00 | Last updated: April 11 2007 03:00
    FT (Subscription)

    China ups the ante on HK listings
    By Sundeep Tucker and Jamil Anderlini in Hong Kong
    Published: April 15 2007 22:17 | Last updated: April 15 2007 22:17
    FT (Subscription)

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