Start the conversation
From Staff Reports
Aluminum Corp. of China Ltd. (NYSE: ACH) and Jiangxi Copper Co. Ltd. (SHA: 600362) soared to records yesterday (Monday), bolstered by strong fundamentals for the copper market and expectations that the shares could be a favored selection when investors in China gain direct trading access to the Hong Kong Stock Exchange starting later this week. Shares of Aluminum Corp. of China, known as Chalco, sprinted 32% to close at an all-time high of $2.74, while Jiangxi Copper climbed 26% to a record close
The combined gains by Chalco and Jiangxi Copper accounted for nearly 20% of the gains of the Hang Seng China Enterprises Index, and the advance in industrial metals came in the context of a broad rally to start the trading week in Hong Kong
“This is a play on the discount between A-shares [of Mainland China] and the H-shares [which are Hong-Kong based]," Francis Lun, general manager of Fulbright Securities in Hong Kong, told MarketWatch. "Chinese investors will be able to buy H-shares directly from Wednesday, and this rally is in expectation of that."
Companies listed in Shanghai and denominated in yuan, the Chinese currency, trade at a forward Price/Earnings ratio of between 62 and 70, while similar shares listed in Hong Kong trade at about 19 to 20 times projected earnings, according to a research report by Phillip Securities in Hong Kong.
Just last week, Beijing said it would allow Chinese individuals to trade directly in Hong Kong shares under a pilot scheme offered through local branches of the Bank of China. Investors will be exempt from rules that limit individual buying and selling in foreign exchange at $50,000 a year. The first trades under the trial program are expected Wednesday. Duetsche Bank, the giant investment banker, which now estimates the new trading policy, along with other recent initiatives designed to facilitate overseas fund flows, will channel an additional $40 billion into Hong Kong-listed stocks during the year to June 2008.
Related Articles and Links:
- Money Morning Report: China Moves to Enable Individuals to Buy Hong Kong Shares.
- MarketWatch.com: Hong Kong-Listed Copper, Aluminum Shares Surge.
- Money Morning Report: Financial Institutions in Asia Feel Subprime Shock.