A-shares are 0.7% premium to H-share peers - close to lowest level since 2006. The Mainland-Hong Kong "A-H premium" has fallen to 100.7 currently, leaving A-shares now only 0.7% premium to H-share peers, vs. a long-term average A-share premium of 28.6% (Fig 10).

As we pointed out in our inaugural A-share Monitor (April is the Cruellest Month, 7 May), the A H convergence trend is due to three factors: increasing QDII and QFII quotas widening the conduits for dual-market arbitrage; the introduction of CSI 300 Index futures and margintrading/ short-selling facilities, which have created avenues for mainland investors to profit from stock price declines (rather than only from price increases as previously); and, fundamentally, the fact that Chinese authorities have been tightening policy more aggressively than US authorities (Hong Kong monetary conditions remain more directly dependent on Fed policy than People's Bank of China policy).

Key A-H discounts remain in Financials and Materials, including ICBC, CCB, BoCom, China Merchants Bank, China Minsheng Banking, Ping An Insurance, China Life and China Pacific Insurance, plus China Shenhua Energy and Angang Steel.

Where A-share premiums still exist, 2 stocks demonstrated a narrowing of more than 10% in A to- H premiums in the past two weeks, including Luoyang Glass and Guangdong Kelon Elec
(Fig11).

Thirteen names managed to widen their A-to-H premium by more than 10% in the past two weeks, including: Sinopec, Sinopec Shanghai Petrochem, Chongqing Iron & Steel, Jiangxi Copper, Zijin Mining Group, Huadian Power Int'l Corp, Shanghai Electric, ZTE Corp and Guangzhou Pharmaceutical (again, see Fig 11).

Eoin Treacy's view A-shares are 0.7% premium to H-share peers - close to lowest level since 2006. The Mainland-Hong Kong "A-H premium" has fallen to 100.7 currently, leaving A-shares now only 0.7% premium to H-share peers, vs. a long-term average A-share premium of 28.6% (Fig 10).

As we pointed out in our inaugural A-share Monitor (April is the Cruellest Month, 7 May), the A H convergence trend is due to three factors: increasing QDII and QFII quotas widening the conduits for dual-market arbitrage; the introduction of CSI 300 Index futures and margintrading/ short-selling facilities, which have created avenues for mainland investors to profit from stock price declines (rather than only from price increases as previously); and, fundamentally, the fact that Chinese authorities have been tightening policy more aggressively than US authorities (Hong Kong monetary conditions remain more directly dependent on Fed policy than People's Bank of China policy).

Key A-H discounts remain in Financials and Materials, including ICBC, CCB, BoCom, China Merchants Bank, China Minsheng Banking, Ping An Insurance, China Life and China Pacific Insurance, plus China Shenhua Energy and Angang Steel.

Where A-share premiums still exist, 2 stocks demonstrated a narrowing of more than 10% in A to- H premiums in the past two weeks, including Luoyang Glass and Guangdong Kelon Elec
(Fig11).

Thirteen names managed to widen their A-to-H premium by more than 10% in the past two weeks, including: Sinopec, Sinopec Shanghai Petrochem, Chongqing Iron & Steel, Jiangxi Copper, Zijin Mining Group, Huadian Power Int'l Corp, Shanghai Electric, ZTE Corp and Guangzhou Pharmaceutical (again, see Fig 11).