Wednesday, August 29, 2007

Mainland China vs H Shares Hongkong

Time for another China update....... Fascinating!

Zeit für ein neuerliches China Update.......Faszinierend!

A few days ago the Chinese government has indicated that it will expand a program allowing its citizens to buy Hongkong-traded stocks directly to calm down the mainland stock market and ease the liquidity pressure that has driven stocks into the stratosphere.

So far the only thing that happened is that the Chinese shares that are listed in Honkong spiked and have closed a little bit of the gap (although, some shares jumped 70%). Needles to say that the stock market in Shanghai also climbed to multiple new highs. It will be key to watch if the gap in the future will be closed from the bottom (Hongkong 2008 PE 20 ) or from the top ( Mainland PE 40-50).

The longer the markets refuse to close the gap from the top the uglier the awakening should be.

> see also the chart "P/E Ratios: Nasdaq vs China"

Vor einigen Tagen haben die chinesischen Offiziellen durchblicken lassen das es zukünftig möglich sein wird auch chinesische Aktien in Hongkong ohne größere Einschränkungen zu erwerben. Dieser Schritt soll etwas den Druck von den heimischen Aktienmärkten nehmen und die Liquidität etwas breiter streuen.

Bisher hat diese Maßnahme in erster Linie dazu geführt das die chinesischen Aktien die in Hong Kong gelistet sind einen kleinen Teil der Lücke von unten geschlossen haben (obwohl einzelne Aktien über 70% explodiert sind). Überflüssig zu erwähnen das der Index in Shanghai munter weiter neue Hochs markiert hat. Es wird spannend zu sehen sein von welchsem Ende die zukünftige Bewertungslücke geschlossen werden wird. Momentan notieren die China/Hong Kong Aktien mit einem 08 er KGV von rund 20 während die Festlandaktien noch immer mit einem atemberaubenden KGV von 40-50 allen die Show stehlen.

Je länger die Anpassung von oben aufgeschoben wird desto ungemütlicher dürfte das erwachen sein.

> The table shows the run druing the last 5 days and ytd, estimated pe 2008 H shares Hongkong and mainland China, the "theoretical valuation gap", marketcap

Here another example that shows how different the two chinese markets act.

Hier ein weiteres Beispiel das anschaulich zeigt wie verschieden die zwei chinesischen Märkte zur Zeit noch reagieren.

The Financial Times is asking What’s the real Bank of China price?

On Thursday, Bank of China fessed up to holding just under $10bn in US subprime paper and CDOs. While its ‘H’ shares fell more than 6 per cent in Hong Kong in response, the reaction of investors in Shanghai was to push the price of the ‘A’shares up 1.3 per cent.

The gap between Bank of China’s mainland and HK prices has been widening for nine months now. This week the average premium of A shares over H generally widened to 70 per cent for the first time - and that is in response to Monday’s news that China intends to let its residents buy overseas stock (such as H shares)!

> But this is what happens when the central bank is offering deposit rates that are lower than the inflation rate...

> Aber das sollte nicht weiter verwundern wenn die Notenbank den Einlagenzinssatz unterhalb der Inflation festsetzt......
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Blogger jmf said...

China Sells $79 Billion Bonds to Set Up Reserves Fund

2:04 AM  
Anonymous Anonymous said...

This seems like an odd transaction to me. Who sold bonds to whom? So "China", which I assume means the government of China, or a part of it, sold bonds to "the central bank", "providing funds for a state agency that will invest part of the world's largest currency reserves". Who holds these currency reserves? Is it the government or the central bank? It must be the central bank, right? If not, i.e. it is the government, why does the government have to sell bonds in order to diversify its currency reserves? That does not make sense. If the central bank holds the currency reserves, then they must not only hold them but also own them -- why else would the government have to sell a bond to the central bank in order to access the currency reserves? But what is the source of these reserves? Isn't it taxes etc collected by the government?

"It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people."

I guess I'm one of those people who questions the rationale for the existence of these central banks, many of which have a sort of vague relationship to the government and the private sector. At times they seem to me to only add obfuscation to 'the money question', which should not be that complex.

I will think more about all of this.


7:28 AM  

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