The surge in shares of Chinese battery giant Contemporary Amperex Technology (3750) and drugmaker Jiangsu Hengrui Pharmaceuticals (1276) highlights a shared advantage – their H-share market caps trail far behind their A-shares, making the stock prices more susceptible to market volatility.
CATL's shares were traded at an over 10 percent premium in Hong Kong to those in the mainland on Friday, while Hengrui’s H-shares, priced at a discount of over 20 percent relative to A-shares at the initial public offering, narrowed the gap to about 7 percent at the close of its listing debut on Friday last week.
The battery maker’s H-share tradable market capitalization was approximately HK$50.2 billion, before deducting locked-up shares, while its A-shares were worth 1.04 trillion yuan (HK$1.14 trillion) on Friday.
Activist investor David Webb had raised concerns over the stock’s low free float in Hong Kong last week.
Of the Hong Kong shares, nearly half or 77.46 million shares are subject to a lock-up period until November 19, significantly limiting the available free float, Webb wrote on his website.
He also noted that the top 25 holders of CATL’s Hong Kong listing hold close to 70 percent of the local shares.
For Hengrui, the market cap of its H-shares in circulation, also including locked-up shares, was around HK$12.4 billion, whereas its A-shares were valued at 347.7 billion yuan. Notably, 41.7 percent of Hengrui’s H-shares, or about 93.77 million shares, are held by cornerstone investors under a six-month lock-up, leaving only 131 million shares as tradable.
Chinese home appliance giant Midea Group (0300), which went public in Hong Kong last year, saw a narrow discount of 3.6 percent between its A and H shares. Its market cap in Hong Kong was HK$53.8 billion, versus 545.1 billion yuan for its A-shares.
This suggests that when the market cap of H-shares in circulation is smaller than that of A-shares, the discount tends to be narrower. Conversely, a larger market cap for H-shares often correlates with a wider discount.
However, there was an exception: SF Holding (6936) which debuted last year, maintained a near 20 percent discount with an H-share market cap of HK$7.08 billion against 47.19 billion yuan for its A-shares.
Among the 153 AH dual-listed stocks, 143 had smaller H-share market capitalizations compared to their A-shares, and only 11 had a discount narrower than 10 percent.
There were also 10 companies defying this trend with larger H-share circulating market caps than A-shares, and BYD (1211) was among the few that was traded at a 5.7 percent premium to the stock in the mainland despite having a HK$571.2 billion market value in Hong Kong, compared to a A-share market cap 470.7 billion yuan.
STAFF REPORTER
