Recently, there has been some excitement in the Hong Kong stock market, especially with Ningde Times landing on H-shares. It not only became the largest IPO globally this year but also saw the rare phenomenon of 'Hong Kong stocks being more expensive than A-shares'. This incident sparked extensive discussion in the market, and questions followed:

– Why are more and more A-share companies going to list in Hong Kong?

– Why can Hong Kong stock prices be higher than A-shares?

– What does this mean for us market participants in the short term and medium term?

I carefully read this in-depth report from CICC, and I will share my views in a way we can all understand.

🧭 Why are A-share companies flocking to Hong Kong stocks?

This wave of 'A to H' listing frenzy is not just a random event; there are several reasons behind it:

1. Policy support: Last year, the CSRC clearly encouraged leading companies to list in Hong Kong, and the Hong Kong Stock Exchange also lowered the threshold, which is completely different from a few years ago when everyone was keen on 'H to A'.

2. Financing efficiency: A-share IPOs are slow, and refinancing is uncertain, but Hong Kong stocks can 'flash placement', making financing much faster. Companies like Ningde, Heng Rui, and Midea are going to Hong Kong for efficiency.

3. Investor structure: Some leading companies in A-shares are approaching the foreign capital ownership limit, and listing in Hong Kong is equivalent to 'expanding capacity', which can attract more overseas funds.

Summary: Listing in Hong Kong is driven by policy support, market response, and genuine needs from companies.

🚀 Why have Hong Kong stocks recently become more attractive than A-shares?

To put it simply, the performance of Hong Kong stocks is much stronger than that of A-shares right now:

– The Hang Seng Index and Hang Seng Tech have risen more than 15% from the beginning of the year, while A-shares, on the other hand, have seen the CSI 300 drop and the ChiNext perform even worse.

– The average daily trading volume of Hong Kong stocks has doubled, indicating that capital is really flowing in.

– The liquidity of the Hong Kong dollar is very abundant (HIBOR has plummeted), and the cost of borrowing money to invest in stocks has decreased, which naturally also boosts the sentiment for Hong Kong stocks.

Especially for new energy leaders like Ningde Times, foreign investors' 'aesthetic' is somewhat different from domestic investors, favoring companies with a global vision and clear business. Coupled with rapid MSCI inclusion, it means another wave of passive funds will have to buy in.

So when you see 'Ningde H-shares are 11% more expensive than A-shares', it is not unfounded; it is logically supported.

🧐 How to view the AH premium? Can it be used as a reference standard?

I think this topic needs to be viewed from two perspectives:

On one hand, the AH premium indeed reflects the different sentiments of the two markets. Previously, many people said 'Hong Kong stocks are discounted', referring to their cheapness. But now, looking at examples like Ningde and Midea shows that Hong Kong stocks can also be favored.

On the other hand, the AH premium essentially reflects not arbitrage opportunities, but differences in market structure (including taxes, exchange rates, and investor preferences). The two markets cannot be freely exchanged, and there is a lack of effective arbitrage mechanisms, so the price difference naturally exists in the long run.

Moreover, currently, there are only 155 AH companies, accounting for less than 7% of Hong Kong stocks, and the industry is still biased towards finance and other 'old economy' sectors. Using this price difference to judge the entire Hong Kong stock market is unreliable.

🧠 My observations

1. Don't be misled by short-term hype: Ningde Times surged just two days after its listing, and the market's hot money and index inclusion clearly boosted it. This initial sentiment premium may not last long.

2. What really matters is the return of pricing power: More and more A-share companies are choosing Hong Kong stocks, indicating that they are willing to engage with foreign capital in a more international market. This is about finding a new valuation anchor.

3. Hong Kong stocks will be more like US stocks: If this wave of 'A to H' continues, the structure of Hong Kong stocks will become increasingly diverse, transitioning from traditional old economy to new energy, consumption, and the internet. This trend is worth noting.

🎯 What does this mean for us ordinary participants?

– Short term: Don't chase the newly listed H-shares at a high price; the sentiment is too strong, and it is easy to ride the elevator.

– Medium term: Pay attention to those A-share companies with high valuations that may become quality companies moving from A to H in the future, such as new energy, innovative pharmaceuticals, and leading manufacturers.

– Long term: If you are a dividend person, those central enterprises and financial AH stocks in Hong Kong that are 'discounted' are worth a little allocation.

After seeing that Ningde's H-shares are more expensive than A-shares, I suddenly remembered hearing people say before: 'Hong Kong stocks are like a wholesale market, A-shares are like a boutique.' Now it seems that sometimes boutiques also need to have sales, and wholesale markets can have viral bestsellers.