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China stocks start robustly on economic rally, Hong Kong differs

China stocks start robustly on economic rally, Hong Kong differs

SHANGHAI: China and Hong Kong stocks made a good start Monday as shareholders took different vision on the suggestions of a deposit insurance draft plan, with bank shares in Shanghai increasing even as Hong Kong merchants continued to sell them off.
China issued draft regulations on Sunday to introduce a bank deposit insurance system for the first time, the latest in a series of steps to fully liberalise interest rates and allow banks to compete on a wholly commercial basis.
The difference of investor opinion over the consequences was highlighted by an index measuring price premiums and discounts between dual-listed companies in Shanghai and Hong Kong , which rose 2.5 percent on Monday to 109.28, its highest level since July 2013.
A value above 100 indicates Shanghai shares are pricing at a premium to shares in the same company trading in Hong Kong, and vice versa.
For example, the price of Bank of China’s Shanghai listed shares stood at 3.36 yuan, compared with its Hong Kong share price at HK$3.97, equivalent to 3.1472 yuan as of 11:07 a.m., an implied discount of 6.3 percent.
Mainland-listed banking shares began rallying on Friday afternoon for unclear reasons, with the index of major Chinese banks gaining more than 8 percent in a single day. It rallied again on Monday morning, led by Everbright Bank and Bank of Communications, but lost steam around 10:30 a.m. (0230 GMT), remaining up 0.5 percent at 4,276.04 points, its highest level since February 2013.
Analysts said that the difference in pricing reflected different priorities. Mainland investors have been steadily pushing up domestic indexes as the central government has signalled a softening stance on liquidity and interest rates, seen as both good for propping up wobbling economic growth and at the same time reducing the risk for domestic banks of getting stuck with more non-performing loans.