An Analysis of the Price Difference of A shares and H shares of Dual-listed Companies
Date Issued
2010
Date
2010
Author(s)
Chiou, Cheng-Hsiang
Abstract
Due to differences of market characteristics in terms of market condition, investors structure and inconvertibility between A shares and H shares between China and Hong Kong stock markets, prices on A shares and H shares representing the same company are different. Normally A shares are higher than H shares. In this report, we aim to analyze the determinants of price discount on H shares.
From all fifty-nine companies our empirical results show that H shares discount can be explained by supply hypothesis, one variable of Hong Kong index from market effect hypothesis, asymmetric information hypothesis and liquidity hypothesis. However investors speculative trading hypothesis is not consist with our expectation. From eight financial institutions samples our empirical results represent that supply hypothesis, market effect hypothesis, asymmetric information hypothesis do affect H shares discount. While investors speculative trading hypothesis is not consist with our expectation and liquidity hypothesis has little relationship with H shares discount rate.
From industry respect, financial industry has lowest discount rate on six percent, properties and construction industry ranked at number two with twenty-three percent and other industries have even higher discount rate. We would conclude to invest in H shares of financial institutions and to avoid A and H shares with high discount rate would be a better option.
Subjects
A Shares
H Shares
Discount
Market Segmentation
Dual listing
Type
thesis
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