You have some very interesting ideas there, thank you. The whole HK stock market appears very undervalued. Why are companies like China Mobile and Food International listed there rather in China? What drives the low valuation of HK stocks - I get sense the whole index is a hollowed out version of its former self?
Well firstly China has two categories of shares- A shares and H shares. A shares refers to those shares that are listed on the mainland and H shares refers to those shares that are listed on the Hong Kong Exchange.
Why some companies have dual listings in HK and China is because of two main reasons:-
- it allows them to raise foreign capital which isn’t possible due to strict capital control regulations on the mainland
- it allows them to expand internationally by using their Hong Kong correspondence to transfer money from the mainland to Hong Kong to then use that to expand internationally.
The HK market is cheap while the Mainland market is more standard when it comes to valuations because the Hong Kong market has foreign capital in addition to domestic capital and foreign investors particularly U.S. ones have been dumping their shares due to irrational and propaganda derived fear of China and Chinese policy.
Thanks for reminding me of China Mobile and that dividend + the good point that the telcos there are not necessarily out eating each other like in every other market (although the capex requirements to keep up with tech changes is always a concern). In Myanmar, they let the Vietnamese in as a 3rd operator and when they were ready to launch, the 2 incumbents dramatically cut prices to F them over 🤣
Honestly the telco business is really crap everywhere even here in Thailand with so many operators driving each to the bottom. I generally dislike the business but the operating environment in China drives me to it because it’s basically a cartel if you think about it.
Add in the government’s incentive to build data centers and cloud infrastructure through these companies to safeguard their mammoth amount of data from any threats of sabotage and you have an excellent proposition trading at exorbitantly cheap valuations.
Okay thanks, understood the foreign money has been running out depressing prices. Can Mainland Chinese invest in Hong Kong listed companies or is it more complicated for them than buying stock in A listed companies?
Most of the larger names like China Mobile are on the stock connect. The smaller names like food international unfortunately aren’t so it’s a bit more complicated for them. You have to presume that if mainland capital enters more into the larger names and sentiments improve bringing Asian investors more into the Hong Kong market then a rising tide will lift all boats. Otherwise these stocks have high dividends so you get paid to wait. If you’re looking for near to medium term catalysts then I’d suggest buying the bigger names.
Both of those two you mention are of particular interest, the former because they are just great businesses the latter because I own a small business in Australia in a similar vein. Thanks again, I'm not quite ready to subscribe just yet as I was a bit too hasty when I first discovered substack!
I hope I can provide you and all readers with the most value that’s physically possible for me. This is just an avenue for me to share my opinions and perspectives with everyone. Hopefully you’ll like my future posts as much as you liked this one also you might also want to read some of the other posts as well if you’re into the food and restaurant business. Thank you so much for your positive feedback it’s what keeps me going
You have some very interesting ideas there, thank you. The whole HK stock market appears very undervalued. Why are companies like China Mobile and Food International listed there rather in China? What drives the low valuation of HK stocks - I get sense the whole index is a hollowed out version of its former self?
Well firstly China has two categories of shares- A shares and H shares. A shares refers to those shares that are listed on the mainland and H shares refers to those shares that are listed on the Hong Kong Exchange.
Why some companies have dual listings in HK and China is because of two main reasons:-
- it allows them to raise foreign capital which isn’t possible due to strict capital control regulations on the mainland
- it allows them to expand internationally by using their Hong Kong correspondence to transfer money from the mainland to Hong Kong to then use that to expand internationally.
The HK market is cheap while the Mainland market is more standard when it comes to valuations because the Hong Kong market has foreign capital in addition to domestic capital and foreign investors particularly U.S. ones have been dumping their shares due to irrational and propaganda derived fear of China and Chinese policy.
I linked to this post in my Monday links posts: https://emergingmarketskeptic.substack.com/p/emerging-markets-week-february-3-2025
Thanks for reminding me of China Mobile and that dividend + the good point that the telcos there are not necessarily out eating each other like in every other market (although the capex requirements to keep up with tech changes is always a concern). In Myanmar, they let the Vietnamese in as a 3rd operator and when they were ready to launch, the 2 incumbents dramatically cut prices to F them over 🤣
Honestly the telco business is really crap everywhere even here in Thailand with so many operators driving each to the bottom. I generally dislike the business but the operating environment in China drives me to it because it’s basically a cartel if you think about it.
Add in the government’s incentive to build data centers and cloud infrastructure through these companies to safeguard their mammoth amount of data from any threats of sabotage and you have an excellent proposition trading at exorbitantly cheap valuations.
Okay thanks, understood the foreign money has been running out depressing prices. Can Mainland Chinese invest in Hong Kong listed companies or is it more complicated for them than buying stock in A listed companies?
Most of the larger names like China Mobile are on the stock connect. The smaller names like food international unfortunately aren’t so it’s a bit more complicated for them. You have to presume that if mainland capital enters more into the larger names and sentiments improve bringing Asian investors more into the Hong Kong market then a rising tide will lift all boats. Otherwise these stocks have high dividends so you get paid to wait. If you’re looking for near to medium term catalysts then I’d suggest buying the bigger names.
Both of those two you mention are of particular interest, the former because they are just great businesses the latter because I own a small business in Australia in a similar vein. Thanks again, I'm not quite ready to subscribe just yet as I was a bit too hasty when I first discovered substack!
I hope I can provide you and all readers with the most value that’s physically possible for me. This is just an avenue for me to share my opinions and perspectives with everyone. Hopefully you’ll like my future posts as much as you liked this one also you might also want to read some of the other posts as well if you’re into the food and restaurant business. Thank you so much for your positive feedback it’s what keeps me going
Great Stuff! Will there be a part 3? ... Tai Cheung 88 HK, Chen Hsong 57 HK are some further examples perhaps
I might consider doing it just at a later date though