Reply #34: Shanghai wrests stock pricing power from Hong Kong

[54anickel]

This could get interesting

http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyID=2006-12-29T130456Z_01_SHA67128_RTRUKOC_0_US-MARKETS-SHANGHAI-HONG-KONG.xml&from=business

SHANGHAI/HONG KONG (Reuters) - The soaring share prices of some of China's biggest companies like ICBC (601398.SS: Quote, Profile , Research) and China Life Insurance (2628.HK: Quote, Profile , Research) underline a new trend in the stock markets.

Shanghai, not Hong Kong, is starting to take the lead in setting the values of Chinese firms.

The trend may prompt foreign investors to focus more attention and resources on the domestic Chinese stock markets, even though their buying of yuan-denominated A-shares is limited by strict quotas.

It will also encourage some Chinese firms raising funds, as well as Chinese investors, to go to Shanghai rather than Hong Kong or overseas markets -- which may in the long term help Shanghai win an unchallenged role as the top financial center for China, analysts say.


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Rather than assuming the Shanghai market has become overheated or overvalued, many Hong Kong investors are revising their appraisals of H-shares to follow Shanghai's lead.

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But there are reasons to think Shanghai's pricing power will only continue to increase over the long term. One is the dramatic expansion and deepening of the Shanghai market as Chinese regulators push their policy, launched this year, of having China's top companies list domestically.

Another reason is the relentless appreciation of the yuan <CNY=CFXS> against the U.S. dollar, which is increasing the yuan's importance as a store of value and therefore the attractiveness of yuan-denominated A-shares.

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