Home Market Premium for Dual-Listed Chinese Firms Likely to Grow in 2024

Chinese companies that are listed on both domestic and international exchanges generally experience higher valuations in their home markets compared to those listed overseas. Specifically, shares of dual-listed firms tend to see greater premiums on stock exchanges within China than on the Hong Kong stock exchange. This discrepancy is anticipated to expand in the coming year due to favorable policy directions, according to market analysts. The premium, which currently is at a 13-month peak, may see further growth into 2024.

Rising Demand on Home Soil

The valuation premium phenomenon can be attributed to several factors, including the limited access Chinese investors have to overseas markets, strong local investor sentiment, and a preference for domestically available investment opportunities. This scenario creates a high demand for shares on the Shanghai and Shenzhen exchanges, subsequently driving up their prices in comparison to those in Hong Ang. As policies are expected to increasingly favor domestic capital markets, the divergence in share valuation could widen even more.

Analysts' Expectations

Market experts are foreseeing a bullish trend for Chinese shares on the home front, with policies likely to create tailwinds that could propel the market further. This environment may result in an increase in the already substantial premium Chinese companies enjoy on their home exchanges. Significant players such as Morgan Stanley MS, with strong expertise in the financial sector, provide valuable insight into these market trends, and their research often guides investor expectations.

Implications for Investors

For international investors and those with access to multiple markets, this developing trend signifies the importance of being strategic about where to purchase shares. The widening premium gap may also affect decisions concerning holdings in firms like Shenzhen International Holdings Limited SZIHF, where discerning the optimal exchange for trading could have pronounced implications on investment returns.

premium, stock, China