H-Shares Covered Warrants On Bursa
These covered warrants had a double fillip for the last couple of days. One, was the recovery in all Asian markets following the Fed's rate cut. Second, the allowance by Beijing for its residents to buy HK listed shares with no restrictions. Most have more than doubled in price over the last couple of days. Are they still good buys?
I have been harping on the H-shares and the related covered warrants. The discount buffer is still there, hence I believe strongly that there will more upside in store. The H-shares warrants comes at a unique time, probably investors won't another chance like this. Great discount buffer of 20%-40%. Beijing issued notice that more H-shares will need to come back to list in Shanghai to boost options/supply for mainland investors. QDII rules. Most recently, the permission to buy HK listed stocks.
Read the WSJ just now and they had a negative slant on the size of the liquidity that would be investing in HK listed shares. They cite factors such as mainlanders having a bigger belief in the uptrend of Shanghai and Shenzhen bourses, and the currency factor. I have to say that WSJ have gotten this one wrong. One of the key positives from the new rules is not so much that they can buy HK listed shares, but that they can keep proceeds in currencies other than the yuan. Plus, there is no limit like before. WSJ may be underestimating the amount of funds swishing in China that falls under the "grey areas" (illegal businesses, unreported revenues, business transactions not done at arm's length, "corruption", slush funds, improperly diverted government funds, etc...). This is a great avenue to get these funds out of the country, before they get themselves out of the country.
Even putting the dark side aside, on fundamentals its a prime opportunity and Chinese being Chinese would easily recognise a big opportunity.
Below are the top picks with negligible premiums:
warrant px / maturity
CCCC-C1 0.28 / 31 Jan 2008
China Life-C1 0.42 / 17 Jan 2008
China Mobile-C1 0.17 / 4 March 2008
China Mobile-C3 1.14 / 13 Jan 2008
China Mobile-C4 0.18 / 30 March 2008
ICBC-C1 0.16 / 4 March 2008
ICBC-C3 0.13 / 2 Jan 2008
Petrochina-C1 0.14 / 4 March 2008
Shenhua-C1 0.06 / 25 Feb 2008
Sinopec-C1 0.075 / 31 Jan 2008