H-Shares

What is H-shares?

H-Shares is a class of share of a public company from Mainland China that trades in Hong-Kong Stock exchange in Hong Kong Dollar. Foreign Investors can buy such shares freely like other equities in Hong-Kong stock Exchange. This was a huge relief for International Investors. Earlier they were not allowed to buy shares of public companies in China trading under Shenzhen or Shanghai Stock exchanges unless they were Qualified Foreign Institutional Investors.

Explanation

  • Stock Market in Mainland China is very restrictive and is only open to Chinese people but with lots of restrictions. Not everyone can invest in Chinese equities like in other developed countries. So to ease this situation, the Chinese government came up with this concept.
  • Hong Kong is the Special Administrative Region of the People’s Republic of China. Hong Kong was returned by Britain to China in 1997 when the 99-years lease ended. So unlike china, which is very conservative, Hong Kong’s policies are more liberal, and English is also its official language. Though Hong Kong is part of China, it allowed Hong Kong to govern itself for another 50 years. So policies and stock exchanges are very liberal in Hong Kong.
  • It is difficult for foreigners to trade Chinese shares in exchanges like Shenzhen and Shanghai. So the Chinese government came up with a new policy of allowing public companies of china to list their shares in the Hong Kong exchange also. These shares are called H-shares and can be freely traded by international investors in Hong Kong Dollar (HKD).
H-Shares

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Source: H-Shares (wallstreetmojo.com)

Example

Example #1

Example #2

NE Electric is trading under the local code (00042.HK) is also an H-share, which is trading under the Hong-Kong Stock exchange. The average trading price as of 3rd January 2020 is 0.565HKD.

Index of H-Shares

This Index is the Hang Seng China Enterprises Index. The code is HSCEI. It is a free-float market-capFree-float Market-capFree Float Market Capitalization is a method by which the market cap of an index’s underlying are calculated. It is calculated by multiplying the price with the number of outstanding shares available for investors and traders.read more weighted index. Earlier only H-shares were part of it. Later the Index included Red-Chips and Private Enterprises. The current price of the Index is at HKD 11,253 as of 3rd January 2020. This stock index helps to understand its movement in the Hong Kong Stock Exchange.

H-Shares vs. A-Shares

Conclusion

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