Hisense Kelon - dual listing convergence play ?

[bmann025]

I wonder if and how quickly dual listing stocks will now close the gap between Shanghai and HK prices and where they will meet.

I chose 921, because they lost more than 50% in recent months in HK, but not in Shanghai and because the PE is still attractive (compare with Haier 1169) and the earnings reduction may be temporary.

I would be particularly interested in opinions about dual listing convergence plays in general, are there any other interesting companies with low valuations in HK and a much higher price in Shanghai ?

[bmann025]

Another one would be Jingwei Textile 350, PE after yesterday's increase slightly above 10, steep discount in HK (>50%), and huge pile of cash.

[CityFarmer]

It is one of the reasons, the funds are standing-by in HK and SH, and eyeing on similar counters. With the limitation on daily liquidity, Is there any room for retail investor to participate?

[bmann025]

I saw that some of the stocks with huge premiums in SH increased even there yesterday.

I don't understand that. Why would anyone buy 921, 350 etc. in SH instead of selling it, even shorting it and buy back on Monday in HK ?

Of course, it is not the same share, but it it the same fraction of the company, so what is the justification for price differences ?

I can understand though that funds with significant holding can't sell and buy so quickly due to market iliquidity, but that appears to offer a free lunch for small investors ... ?

[yawnyawn]

I wonder if and how quickly dual listing stocks will now close the gap between Shanghai and HK prices and where they will meet.

I chose 921, because they lost more than 50% in recent months in HK, but not in Shanghai and because the PE is still attractive (compare with Haier 1169) and the earnings reduction may be temporary.

I would be particularly interested in opinions about dual listing convergence plays in general, are there any other interesting companies with low valuations in HK and a much higher price in Shanghai ?

This is the H share discount dated on 10 Nov. I believe most in the list have closed the premium already.

H SHARE DISCOUNT
998 HK CHINA CITIC BK-H -17.3%
525 HK GUANGSHEN RAIL-H -21.5%
1138 HK CHINA SHIPPING-H -33.3%
2883 HK CHINA OILFIELD-H -31.6%
1898 HK CHINA COAL ENE-H -19.7%
991 HK DATANG INTL PO-H -23.8%
358 HK JIANGXI COPPER-H -19.4%
1055 HK CHINA SOUTHERN-H -27.0%
548 HK SHENZHEN EXPRE-H -28.3%
1072 HK DONGFANG ELECT-H -30.9%
995 HK ANHUI EXPRESS-H -26.7%
874 HK BAIYUNSHAN PH-H -24.6%
1919 HK CHINA COSCO HO-H -39.4%
670 HK CHINA EAST AIR-H -35.6%
323 HK MAANSHAN IRON-H -40.9%
2600 HK ALUMINUM CORP-H -27.8%
107 HK SICHUAN EXP-H -33.0%
2727 HK SHANGHAI ELECT-H -50.1%
1171 HK YANZHOU COAL-H -43.4%
2899 HK ZIJIN MINING-H -38.5%
2866 HK CHINA SHIPPING-H -46.1%
588 HK BEIJING NORTH-H -46.1%
338 HK SINOPEC SHANG-H -46.3%
553 HK NANJING PANDA-H -43.7%
1065 HK TIANJIN CAP-H -45.0%
719 HK SHANDONG XINHU-H -52.3%
300 HK SHENJI GROUP-H -45.7%
350 HK JINGWEI TEXTIL-H -60.8%
1053 HK CHONGQING IRON-H -51.6%
187 HK JINGCHENG MAC-H -49.4%
42 HK NORTHEAST ELEC-H -54.9%

[bmann025]

I haven't seen a stock closing the gap yet. Some need to more than double to do this.

[bmann025]

921 was not a really clever choice, because it is not on the eligible list
http://www.aastocks.com/en/cnhk/market/hk-connect.aspx

[holy grail]

convergence is just a theory to happen over long term, but when two stocks are not fully convertible there is no way to ensure the gap will close as there is no arbitration. It can trade anywhere it likes to trade. Worse still both stocks could goes down. Especially when one side of the market is not shortable it is merely a good notion/excuse but not really a good rationale to trade.

[bmann025]

The rational for every buyer is to purchase the cheaper stock, when both represent the same share of a company with identical rights.