Even the cutest homecoming queen would struggle to achieve such a rousing reception. China Construction Bank’s plan to sell up to 9bn shares on the Shanghai stock market – the latest hui gui, or homecoming, by a Hong Kong-listed Chinese issuer – was met with a 2.5 per cent rally across the border.
It may seem an odd response to the issuance of a further $7bn-$8bn worth of stock, but past experience suggests it is in fact perfectly rational. When Bank of Communications, the fifth biggest lender, “returned” to Shanghai, it was greeted with a first-day pop of 71 per cent. Bank of China was rewarded with a 23 per cent gain on its local-currency A-share debut. Higher mainland prices in turn set the tone for momentum across the border – albeit with a hefty price differential. This is currently standing at about 60 per cent after last month’s move to allow domestic investors to buy unlimited Hong Kong shares helped narrow the premium. But a combination of glitches in the system, an appreciating local currency and mainlanders’ preference for the galloping home market means Shanghai remains by far the preferred investment choice.
