China’s H Shares Narrow Gap With Mainland Peers to 20-Month Low

  • Valuations, rising premiums helping insurers: Hengsheng Asset
  • China investors increase net purchases through southbound link

Chinese shares rose in Hong Kong, narrowing their price gap with mainland counterparts to the least since 2014, as financial companies climbed and mainland investors continued a buying spree.

The Hang Seng China Enterprises Index advanced 0.4 percent in a sixth day of gains. New China Life Insurance Co. jumped toward a nine-month high, leading insurers higher. Mainland traders were net buyers of 5.2 billion yuan ($780 million) of Hong Kong shares through the Shanghai exchange link. The Shanghai Composite Index added 0.1 percent.

The H share gauge has rallied 7.9 percent over the past month in Asia’s best performance as traders reduced bets for higher U.S. borrowing costs and a majority of members on the index beat earnings estimates. Shanghai shares have treaded water in the same period as concern state-backed funds will trim their equity holdings capped gains. That’s narrowed the premium of mainland stocks over their Hong Kong peers to 20 percent.

“Hong Kong stocks have an advantage over mainland shares from a valuation perspective,” said Wang Chen, a partner at Xufunds Investment Management Co. in Shanghai. While shares look “overbought in the short term,” the brokerage remains “positive” on the outlook, he said.

The Hang Seng China Enterprises Index climbed to 10,008.21. The measure’s 14-day relative-strength index has been above the threshold of 70 in the past three days, a signal to some investors that it may be due a pullback. The Hang Seng Index advanced 0.8 percent.

Insurers accounted for four of the top nine gainers on the H share gauge. New China Life rose 2.6 percent to its highest close this year. China Life Insurance Co. climbed 2 percent. The industry has led the rally in the past month on an improving outlook.

“The valuations of Hong Kong-listed Chinese insurance stocks are lower than the mainland peers so they are attractive to big investors,” Dai Ming, a money manager at Hengsheng Asset Management Co. in Shanghai. “Fundamentally speaking, premium incomes for insurers are growing pretty fast this year, so that’s helpful to lift their earnings and new business values.”

The Shanghai Composite gained to 3,095.95 on trading volumes that were 17 percent below the 30-day average. China’s benchmark equity index has gone 18 sessions without a 1 percent closing move in either direction. With state-backed funds holding sizable stakes in listed companies, any attempt by them to trim holdings can spur a broader sell-off, prompting the funds to step back in again, according to Jingxi Investment Management Co.

China’s exports slipped 2.8 percent in U.S. dollar terms in August from a year earlier, while imports rose for the first time since 2014, the customs office said on Thursday. The statistics bureau is due to release August inflation figures on Friday and data on industrial output, fixed-asset investments and retail sales next week.

— With assistance by Shidong Zhang

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