I was thinking about buying some ICBC or BoC shares in Shanghai, but the price difference of the Shanghai and Hongkong (or ADRs in NYSE) kept me from pulling the trigger. Since one Yuan is roughly worth one HKD, why would I pay premium for the A shares if I can get H Shares (or the equivalent US ADRs) for a discount?
Unless the Yuan depreciates (relative to HKD and USD) significantly (it’s possible but unlikely), buying A shares does not make sense to me.
ICBC: 601398 (Shanghai) CNY 6.80; 1398 (Hongkong) HKD 4.80
Bank of China: 601988 (Shanghai) CNY 5.80; 3988 (Hongkong) HKD 3.80
China Life: 601628 (Shanghai) CNY 48.00; 2628 (Hongkong) HKD 30.00; LFC (NYSE) USD 57.41
Note one share of LFC (ADR in NYSE) is worth 15 shares of 2628.HK, the price of 2628.HK is the same as LFC, if we consider this units conversion and HKD/USD conversion.
The main reason for the price difference is the supply and demand: Chinese people have lots of free money (in CNY), but they can only invest inside China. The China capital market has grown significantly, but it still could not meet the demand from flood of domestic investors.