MSCI China closing in on Shanghai
Optimism that Beijing policymakers will ease monetary policy has helped drive the offshore gauge up 4.2%
The premium of Shanghai shares over the nation’s offshore traded stocks is close to being wiped out for the first time in at least two decades.
The MSCI China Index trades at 17.4 times reported earnings, compared with 17.5 for the Shanghai Composite Index. The gap is 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 last week, with mainland markets closed for holidays. Optimism that Beijing policymakers will ease monetary policy has helped drive the offshore gauge up 4.2 per cent, while Shanghai stocks are likely to catch up when markets reopen on Monday.
Offshore gains
Still, the narrowing gap shows how much better offshore shares have been doing: the Shanghai Composite’s 7.9 per cent gain this year is dwarfed by the MSCI China’s 47 per cent surge. While mainland equities are still in the shadow of 2015’s boom-bust, overseas investors can’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.
Meanwhile, Hong Kong’s benchmark stock index closed at its highest level in nearly 10 years yesterday, supported by Chinese automakers and banks.
The Hang Seng index rose 0.3 per cent to end at 28,458.04 points, its highest close since late 2007.
The index rose 3.3 per cent on the week, its biggest such gain in 12 weeks. The Hong Kong China Enterprises Index rose 0.5 per cent to end at 11,459.09 points, its highest close since mid-2015. Sensex (IN)