S-Shares & H-Shares

cheeping said...

Hi,

On last Thurs, it is reported in Singapore that a 3rd QDII fund has been approved in China. This fund is special in the sense that it caninvest in China companies listed outside China/HK: i.e. Singapore and US. Due to this, S-shares has risen tremendously on Friday and Monday due to their relatively cheap valuations, even against H-shares.

What is your take on this new development? Wouldn't teh S shares being more undervalued has more attractiveness?

sopskysalat said...

There is a spillover effect to drive the forgotten S-shares.

A>H>S Thus, the theme is turning its direction into the Singapore market creating a phenomenon among the S-shares.

Yes, there is a new approved fund to invest into S-Shares, China shares listed in Singapore. However, S-Shares are not H-Shares. Given a choice the classier and bigger ones list on HKSE while the smaller specky ones list in Singapore. The one big drawback of S-Shares, they will probably NOT be asked to go relist back into Shanghai or Shenzen anytime soon. The third QDII is good news but the focus of capital onto S-Shares will peter out quickly for many reasons.

The attraction in H-shares are: the discount gap; these are superior companies in terms of market size and corporate management; these are always among the top 100 companies of all China; these are the companies asked to come back to relist in Shanghai to satisfy demand for their shares; due to the size, they are highly attractive to big international funds due to their size and liquidity; they are considered as the next best exposure to an indirect play into China; many international funds investing into Greater China (HK, China and Taiwan) are based in HK for obvious reasons; etc. While the news is good for S-shares, its not mind blowing.