Hong Kong’s

Growth Enterprise Market(GEM) shot up over 10 percent

in the same period, its biggest weekly gain in nearly six years.

* Funds trying to arbitrage major price differences

PUMPING IN LIQUIDITY?

“There are not many good investment opportunities here, so

we would naturally want to hunt for new targets elsewhere,” he

said.

On Wednesday, Chinese investors used the entire 10.5 billion

yuan ($1.69 billion) daily investment quota for

buying Hong Kong stocks under the Shanghai-Hong Kong Stock

Connect scheme for the first time.

This propelled the Hang Seng China Enterprises Index

up 5.8 percent, following a 6.43 percent gain last week, and

helped the Hong Kong exchange reach record volume on Wednesday.

But this time may be different. Domestic fund managers say they are seeking to exploit a

major pricing imbalance between the markets, the result of a

mainland rally that until now showed little sign of spilling

over into Hong Kong.

Shanghai-based hedge fund manager Xia Xiaohui thinks such

price differences cannot last.

Including Wednesday’s gains, China’s CSI300 index

has soared 92 percent during the past year while the Hong Kong

China Enterprises Index is up 29.8 percent.

“With such a big price gap, why don’t I buy stocks in Hong

Kong, especially if it’s the same company?” said Xia, chairman

of Liuhe Capital, which has started buying Hong Kong stocks.

* Previous attempts failed on tepid demand for HK shares

The mainland market is now seen as bubbly without growth,

while Hong Kong has value but lacks liquidity, he said.

By Samuel Shen and Pete Sweeney

“Regulators seem to be very supportive for local funds to

invest in Hong Kong and … there’s real demand and real

interest from local investors.”

“The current huge valuation gap and the excessive liquidity

in mainland funds is raising interest in Hong Kong stocks,” said

UBS strategist Lu Wenjie, noting Chinese small-caps trade at

around 100 times earnings on average, compared with just 10

times for Hong Kong peers.

Invesco Great Wall Fund Management Co is launching China’s

first actively-managed mutual fund to invest via the

Shanghai-Hong Kong Connect, describing the Hong Kong market as a

“gold mine”, and “a low-lying land” in terms of valuation.

Borsera Asset Management Co plans to launch a similar fund this

month.

LARGE PRICE GAP

(Reporting by Samuel Shen and Pete Sweeney; Editing by Nachum

Kaplan and Richard Borsuk)

* Chinese funds buying HK shares ahead of Shenzhen pilot

China’s 5 trillion yuan ($807.36 billion) mutual fund

industry is already getting into position.

As a result, mainland-listed blue chips are now about

one-third more expensive than their Hong Kong versions – as

measured by the China-Hong Kong price premium index -

while Chinese dual listed small-caps trade at a premium of 10

times the cost of the same company’s shares in Hong Kong.

* Investors see HK shares as less bubbly than mainland

stocks

David Dai, Shanghai-based investor director at Nanhai Fund

Management Co, a hedge fund, said he would buy Hong Kong shares

in part because he thinks valuations on mainland exchanges are

overheated.

($1 = 6.1930 Chinese yuan)

In the past, arbitrage opportunities proved a mirage. Several days

later, China allowed insurers to buy shares listed on GEM.. In late March, China’s

securities regulator improved access, letting mainland mutual

funds invest in Hong Kong shares via the connector. So lowly-valued Hong Kong stocks are

becoming increasingly attractive to mainland investors,”

Borsera’s fund manager Zhang Xigang said, predicting that

China’s mutual fund industry would soon start pumping liquidity

into Hong Kong.

Small caps expected to become eligible for mainland

investment when the Shenzhen leg of the stock connect opens -

anticipation is for this year – benefited even more. The

Shanghai-Hong Kong stock connect not only failed to narrow the

premium after its November launch but actually widened it as

Chinese retail investors declined to move money south.

“With the two markets increasingly connected, this is an

obvious arbitrage opportunity.”

SHANGHAI, April 8 Chinese funds are snapping up

shares in Hong Kong, betting that a link-up between the Shenzhen

and Hong Kong stock exchanges, and easier access for

institutional investors, will yield quick double-digit or even

triple-digit arbitrage profits.

“Water flows downward

Freddie Gregory

Freddie Gregory

For recreational bettors who want to place bet with a single bookie. It is suggested that they should select sport book after comparison of different sport books and that sport book should be selected that is offering lowest margins as compare to others these books are mostly located near to the top of odds comparison.
Freddie Gregory

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