5 China Banks Saw H Share Price Top A Share Price

Five out of the six dual-listed banks in China saw their Hong Kong dollar-denominated H share prices outstrip their Chinese yuan-denominated A share prices on October 20, benefiting from an unexpected shining performance of the Hong Kong stock market recently.

On the day, the six dual-listed banks, including Bank of China Limited (SHSE: 601988 and SEHK: 3988), China Construction Bank Corporation (SHSE: 601939 and SEHK: 0939), Industrial and Commercial Bank of China Limited (ICBC, SHSE: 601398 and SEHK: 1398), China CITIC Bank Corporation Limited (SHSE: 601998 and SEHK: 0998), China Merchants Bank Co., Ltd. (SHSE: 600036 and SEHK: 3968), and Bank of Communications Co., Ltd. (SHSE: 601328 and HKSE: 3328), witnessed their H share prices hit new highs in a year.

Calculated by the 0.8809 central parity rate of Hong Kong dollar against Chinese yuan on October 20, the H share price of ICBC stood 21.18% higher than the A share price; that of China Merchants Bank, 14.36%; that of China Construction Bank, 13.96%; that of Bank of Communications, 12.49%; and that of Bank of China, 9.2%. China CITIC Bank, the only one absent from the reversal spree, saw its A share price 20% higher than its H share price on the day.

The rebound of Hong Kong stock market since this March helps narrow the spread between A shares and H shares, with over 10 dual-listed stocks ending up with higher H share price in mid September.

The Hang Seng China AH Premium Index, which tracks the spread between A shares and H shares of dual-listed companies in the country, started to fall after touching a record high of 167.71 points on February 17. The index showed signs of rebound in June before spiraling into another decline in mid July, and finished at 116.18 points on October 20 after sliding to 109.88 points on October 8.

This means that the spread between A share price and H share price is not distant from the lowest of 105.73 points last September, when the stock market in Mainland China was at the bottom, pointed out a market observer.

The six banks are likely to see their H share prices guide the fluctuation of A share prices in the future, because the H stocks are much more stable and the mainland stocks slipped into a correction in August, according to the market observer.

(USD 1 = CNY 6.83 = HKD 7.75)

Source: www.nanfangdaily.com.cn (October 21, 2009)

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