The 2001‐2005 price convergence in the A‐ and H‐shares of Chinese state‐owned enterprises. A story of unprecedented economic, regulatory and political change
| Date | 25 July 2008 |
| DOI | https://doi.org/10.1108/13581980810888859 |
| Published date | 25 July 2008 |
| Pages | 239-250 |
| Author | Thomas A. Birtch,Paul B. McGuinness |
| Subject Matter | Accounting & finance |
The 2001-2005 price
convergence in the A- and
H-shares of Chinese state-owned
enterprises
A story of unprecedented economic,
regulatory and political change
Thomas A. Birtch
Centre for Economics and Policy, University of Cambridge,
Cambridge, UK, and
Paul B. McGuinness
Department of Finance, Business Administration Faculty,
Chinese University of Hong Kong, Shatin, Hong Kong
Abstract
Purpose – The purpose of this paper is to examine the population of Chinese state-owned enterprises
(SOEs) listing A- (Chinese Mainland) and H- (Hong Kong) shares with a view to explaining differential
pricing across the two stock types.
Design/methodology/approach – Despite the fact that both A- and H-shares carry ostensibly the
same shareholder benefits, when issued by a given SOE, major pricing differences are apparent.
The behaviour of such prices for 20 quarters spanning January 2001 to December 2005 was examined.
During this period, a marked contraction in the mean A- to H-price relative occurred, whereby A-prices
generally softened and H-prices soared.
Findings – It was noted that that the principal factors relevant to the contraction in the A- to H-share
price relative relate to two issues: first, an enveloping risk premium centring on state-share disposal
fears, and second, the firming of expectations surrounding the likely deployment of a qualified
domestic institutional investor (QDII) scheme.
Research limitations/implications – Modelling of changing expectations, especially in relation to
uncertain policy deployment, is an invidious task. Measurement of such expectations is obviously
strewn with difficulties.
Originality/value – As pertinent factors largely hinge on the deliberations of the PRC state, the
analysis herein provides useful input into how policy can either wittingly or unwittingly shape general
share price movements. Such insights are especially important given the evolving nature of the
Chinese economy.
Keywords China, Share values,Nationalization, Prices, Economic processes
Paper type Research paper
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
The authors would like to thank an anonymous reviewer of the Journal of Financial Regulation
and Compliance for their valuable comments.
Chinese
state-owned
enterprises
239
Journal of Financial Regulation and
Compliance
Vol. 16 No. 3, 2008
pp. 239-250
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980810888859
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