MSCI CHINA VALUE SIZZLES
Gap with Shanghai index narrowest since July 2014 after 48pc surge this year
THE premium of Shanghai shares over the nation’s offshore traded stocks was close to being wiped out for the first time in at least two decades.
The MSCI China Index traded at 17.4 times reported earnings, compared with 17.5 for the Shanghai Composite Index. The gap was the narrowest since July 2014, just before a rally in mainland equities swelled valuations to twice that of offshore shares.
MSCI’s gauge hasn’t been more expensive than Shanghai’s since Bloomberg started tracking the data in 1997.
The MSCI China has had a head start this week, with mainland markets closed for holidays.
Optimism that Beijing policymakers would ease monetary policy helped drive the offshore gauge up 4.3 per cent, poised for its best week since mid-July, while Shanghai stocks are likely to catch up when markets reopen on Monday.
Still, the narrowing gap showed how much better offshore shares had been doing: the Shanghai Composite’s 7.9 per cent gain this year was dwarfed by the MSCI China’s 48 per cent surge.
While mainland equities are still in the shadow of 2015’s boom-bust, overseas investors couldn’t seem to get enough of the nation’s shares — especially index heavyweights Tencent Holdings Ltd and Alibaba Group Holding Ltd.
Heavy buying of Hong Kong stocks by mainland investors this year also shows that China’s efforts to open its equity markets through exchange links are mostly benefiting shares listed in the former British colony, rather than encouraging net inflows. Bloomberg