Changcheng Sekuritas: Beli Saham A atau Saham H? Strategi Alokasi dari Sudut Pandang Premi

AH premium, since 2006, has been influenced by the Federal Reserve’s monetary policy cycle and by the mechanisms of China’s capital markets, and has gone through three phases: an upward move in the mean, stability at low levels, and a rise in the central tendency. Since the launch of the “package of incremental financial policies” in September 2024, the market has entered a convergence and repair period; Southbound capital’s ability to absorb assets trading at a discount in H shares has strengthened, and the price spread between the two markets has entered an accelerated repair channel. Currently, industry premiums show significant differentiation: industries such as non-ferrous metals, banks, and food and beverage—with stable cash flows—tend to have lower premiums; while core assets such as CATL and China Merchants Bank exhibit a negative premium phenomenon where H shares are more expensive than A shares due to the “certainty aesthetics” of global long-term capital.

We have calculated the average AH premium (as of March 25, 2026) for 177 stocks that are listed simultaneously on both A and H shares. For industries such as non-ferrous metals, banks, food and beverage, coal, and transportation and logistics that have upward-cycle characteristics or stable cash-flow attributes, AH premiums often sit at relatively low levels. In contrast, in industries such as agriculture, building materials, and automobiles, AH premiums produce clear differentiation within the industry; in these industries, the market may place greater emphasis on individual stock’s α opportunities.

Among the 177 shared underlying stocks, industry leaders such as CATL, China Merchants Bank, PharmaBlock, Zhaogeli Innovation, Runqi Technology, and China Resources Pharmaceuticals show the phenomenon of H shares being more expensive than A shares, reflecting global long-term capital’s “certainty aesthetics” toward China’s core assets and “allocation rigidity.” Judging from Southbound capital’s shareholding proportion in Hong Kong stocks, domestic capital does not have very high pricing power over the Hong Kong stocks that produce negative AH premium; it can be said that this negative premium is caused by foreign investors’ favor. Foreign investors’ pricing models strongly prefer products with global competitiveness, high ROE, and high governance transparency, viewing them as 必配 Alpha for China’s growth; this forms an extremely high degree of chip lock-up in the offshore market. Although A-share prices are lower, global institutional investors choose A shares mainly through specific channels such as QFII/RQFII or Stock Connect, and in actual operations face constraints like quota approvals and cross-border fund remittance procedures. Compared with that, H shares, as offshore assets, have their Hong Kong-dollar pricing linked to the U.S. dollar, naturally aligning with global funds’ local-currency performance assessment needs.

From the characteristics of stocks ranked relatively high in the Hong Kong-share discount, most stocks with higher Hong Kong-share discounts likely have, in general, 1) relatively smaller market caps and industries with strong cyclicality, or 2) common traits where ROE is below 10% and profitability is under relative pressure.

Which is more cost-effective: A or H shares: two decision factors

Decision factor one: After-tax interest spread compensation
　　From the perspective of receiving dividends, if the nominal dividend yield of H shares × 80% – the dividend yield of A shares – exchange-rate friction (set at 0.8% in this report) > 0, then holding H shares may be more cost-effective than holding A shares to some extent.

In the AH stock allocation decision-making for the 177 AH underlyings, the nominal dividend yield of AH shares is often misleading due to valuation differences between the two markets. This factor restores the “net cash return” actually received by domestic investors by forcibly including the cost of a 20% Hong Kong Stock Connect dividend tax for the nominal H-share dividend yield (i.e., nominal H-share dividend yield × 80%), and then compares it against the A-share dividend yield to form a true interest spread. In this report, we use the Hong Kong dollar to RMB exchange-rate volatility long-term central tendency of the past nearly 5 years (4%) × 0.2 (i.e., 0.8%) as the “certainty safety margin” established for offshore-asset allocation, to hedge against RMB exchange-rate fluctuations, offshore liquidity discounts, and cross-border settlement time costs. When the net spread surpasses this threshold, the stock’s attribute will shift from a “game asset” driven by foreign-investor sentiment to a “bond-like allocation asset” with absolute return appeal. At that time, the high interest spread after dividend tax not only provides a very strong downside risk buffer, but also becomes the fundamental driver that forces Southbound capital to perform systematic rotation, compelling the AH premium to converge toward intrinsic value.

Explanation of the calculation for the certainty safety margin: (4%) × 0.2, i.e., the volatility central tendency of the Hong Kong dollar to RMB over the past nearly 5 years (4%) × 0.2. This means we pay interest-spread costs only for the “most likely mild appreciation,” and treat large-scale exchange-rate swings (such as dramatic appreciation exceeding 1× volatility) as “systemic risk,” covering them through dynamic rebalancing rather than reserving spread.

Decision factor two: ROE–premium rate matching factor (identifying sentiment mispricing)
　　If a company’s return on equity (ROE) remains stable or is in an upward cycle, then the extreme discount appearing in the Hong Kong share market (i.e., a surge in the AH premium rate) is actually not supported by fundamental logic; it may mainly be caused by a decline in risk preference in the offshore market or by tighter liquidity.

We screen for targets with 2025 Q3 ROE (TTM) > 10% and achieving continuous three-year ROE growth, as well as those with AH premium ranking relatively high. The purpose of this step is to anchor the “endogenous stability” of core assets to rule out value traps. In the context of current global geopolitical and macro-cycle fluctuations, enterprises that can maintain continuous three-year ROE expansion prove that they have very strong industry pricing power and business resilience. This sustained upward earnings curve forms the most solid defensive base for the stock price, ruling out the “value trap” where premiums are passively lifted due to fundamental deterioration.

4
　　Three core variables affecting AH premium in 2026

1. “Second pricing” under energy inflation pressure: premium convergence in resource-related stocks
　　High oil prices are a direct positive for energy and raw material sector stocks among those listed simultaneously in AH (such as China Petroleum, CNOOC, and China Aluminum, etc.). However, in terms of AH premium performance, an interesting feature emerges: “H shares outperform A shares” (AH premium marginally narrows).

As the offshore market that is extremely sensitive to global commodity pricing, the valuation repair of resource-related sector usually occurs earlier and more thoroughly than in A shares. Supported by oil prices above 90 dollars, global long-term capital is more inclined to find risk-hedging assets in discounted H shares.

This earnings upward revision induced by geopolitics will drive Southbound capital to accelerate sweeping up discounted energy H shares. Under the influence of geopolitical conflicts, the premium rate of the energy sector may undergo a proactive contraction; even some high-quality energy stocks may touch historical lower premium levels.

2. Weakened Fed rate-cut expectations: “valuation pressure” from offshore liquidity
　　The Federal Reserve’s resilience in maintaining a 3.5%–3.75% interest-rate range exceeds the market’s expectations at the start of the year. This is a significant negative variable for Hong Kong stocks (H shares) overall.

Delayed rate-cut expectations mean the denominator side of Hong Kong stocks (discount rate) cannot fall as scheduled. When U.S. Treasury yields remain volatile at high levels, the liquidity environment for Hong Kong stocks stays in a “tight-but-balanced” state. By comparison, A shares are mainly driven by domestic monetary policy (currently relatively independent and leaning toward easing), with a smaller marginal impact from the Federal Reserve.

For growth stocks that are extremely sensitive to interest rates—such as Hang Seng TECH and biopharmaceuticals—the disappointment of rate-cut expectations will hinder rebounds in their H shares, while A shares may perform more stably due to domestic policy support. This will cause AH premiums for growth-sector stocks to not contract in the short term; instead, they may face either a phased rebound or remain in high-level sideways volatility.

3. Revaluation of “dividend assets” driven by risk-hedging sentiment
　　Concerns about stagflation caused by high oil prices (high inflation + low growth) have led global risk appetite to retreat. In this environment, “dividend assets” with very high certainty become a safe haven for the entire market.

In the AH-listed stocks, the large financials and public utilities sectors already benefit from expectations of dividend-tax relief. Now, with the added uncertainty brought by high oil prices, funds will further gather into defensive individual stocks with stable cash flows.

This is a two-way contest. On one hand, high interest rates suppress overall Hong Kong stock valuations; on the other hand, risk-hedging capital longs for extremely high dividend yields in H shares. The end result could be that AH premiums for high-dividend sectors enter a “low-level dulling” state—i.e., premiums are already very low, but because external liquidity is not easing, H shares also find it difficult to achieve the final step of “parity premium,” remaining in a modest discount range.

Risk warning:
　　Geopolitical conflicts and disturbances; the slowdown in U.S. economic growth; global risk appetite declining; overseas demand falling short of expectations

1

Observation of AH premium

AH premium can be divided into four different historical stages since 2006 based on the Federal Reserve’s monetary policy cycle and the progress in improving China’s capital market mechanisms. From September 2024 to now, AH premium has been in a clearly downward channel.

Mean-upward phase (2006-2008) accompanied by a rapid rise in valuation levels in domestic equity markets, with the CSI 300 index showing a significant upward trend. During this period, the AH premium index rose in parallel and touched historical highs above 200, reflecting a significant divergence in risk pricing by domestic and overseas investors for the same underlying assets.

Low-level stable phase (2009-2014) saw the CSI 300 index enter a long-cycle range-bound adjustment stage. During this period, the valuation systems of the two markets had a relatively high degree of similarity; the AH premium index often returned to around 100 (parity), and even showed short-term inversion, indicating that the offshore market’s pricing logic for local assets was in a deep correction period.

Central-tendency rising phase (2015-2024.08) since the opening of the Shanghai-Hong Kong Stock Connect at the end of 2014 and the Shenzhen-Hong Kong Stock Connect in 2016, although the AH premium index was lifted from the central 100 to 130-150, its volatility fell significantly, bidding farewell to the “pulse-like” trend before 2015.

Convergence and repair phase (2024.09 to present) since the “package of incremental financial policies” was issued in September 2024, the CSI 300 index showed a significant repair, while the AH premium index exhibited a trend of “inward convergence.” This feature differs from previous periods where the two markets moved in sync with widening spreads; it shows that with the deepening of interconnectivity mechanisms, Southbound capital’s ability to absorb discounted H-share assets has strengthened, and the price gap between the two markets has entered an accelerated repair channel. In addition, the downward movement of AH premium is also closely related to the Federal Reserve entering a rate-cut cycle in 2024, with global financial conditions improving.

2

AH premium structure and characteristics of AH negative-premium stocks

We have calculated the average AH premium for 177 stocks that are listed simultaneously on both AH shares in March 2026 (as of March 25). For industries such as non-ferrous metals, banks, food and beverage, coal, and transportation and logistics that have upward-cycle characteristics or stable cash-flow attributes, the AH premium often sits at relatively low levels. For industries such as agriculture, building materials, and automobiles, AH premiums show clear differentiation within the industry; within these industries, the market may place greater emphasis on individual stock’s α opportunities.

Among the 177 shared underlyings, industry leaders such as CATL, China Merchants Bank, PharmaBlock, Zhaogeli Innovation, Runqi Technology, and China Resources Pharmaceuticals show the phenomenon of H shares being more expensive than A shares, reflecting global long-term capital’s “certainty aesthetics” toward China’s core assets and “allocation rigidity.” Judging from Southbound capital’s shareholding proportion in Hong Kong stocks, domestic capital does not have very high pricing power over Hong Kong stocks that produce negative AH premium; it can be said that this negative premium is caused by foreign investors favoring these stocks. Foreign investors’ pricing models strongly prefer products with global competitiveness, high ROE, and high governance transparency, regarding them as 必配 Alpha for China’s growth; this forms an extremely high degree of chip lock-up in the offshore market. Although A-share prices are lower, global institutional investors choose A shares mainly through specific channels such as QFII/RQFII or Stock Connect, and in actual operation face constraints such as quota approvals and cross-border fund remittance procedures. In contrast, H shares, as offshore assets, have their Hong Kong-dollar pricing pegged to the U.S. dollar, naturally aligning with global funds’ local-currency performance assessment needs.

From the characteristics of stocks ranked relatively high in the Hong Kong-share discount, most stocks with higher Hong Kong-share discounts likely have in common 1) relatively small market caps and industries with strong cyclicality, or 2) ROE below 10% and profitability under relatively more pressure.

3

Which is more cost-effective: A or H shares: two decision factors

Decision factor one: After-tax interest spread compensation

From the perspective of receiving dividends, if the nominal dividend yield of H shares * 80% - the dividend yield of A shares - exchange-rate friction (set as 0.8% in this report) > 0, then holding H shares may be more cost-effective than holding A shares to some extent.

In the AH stock allocation decisions for the 177 AH underlyings, the nominal dividend yield of AH shares is often misleading due to the valuation difference between the two markets. This factor restores the “net cash return” actually received by domestic investors by forcibly including the cost of a 20% Hong Kong Stock Connect dividend tax for the nominal H-share dividend yield (i.e., nominal H-share dividend yield * 80%), and then forms a true spread by matching against the A-share dividend yield. In this report, we establish a “certainty safety margin” for offshore asset allocation using the Hong Kong dollar to RMB exchange-rate volatility central tendency over the past nearly 5 years of 4% * 0.2 (i.e., 0.8%), to hedge against RMB exchange-rate fluctuations, offshore liquidity discounts, and cross-border settlement time costs. When the net profit spread breaks through this critical point, the underlying’s attribute will shift from a “game asset” driven by foreign capital sentiment to a “bond-like allocation asset” with absolute return appeal. At that time, the high dividend spread after dividend tax not only provides a very strong downside risk buffer, but also becomes the fundamental driver for Southbound capital to conduct systematic rotation and compelling AH premium to converge toward intrinsic value.

说明确定性安全边际的计算：the volatility central tendency of the Hong Kong dollar to RMB over the past nearly 5 years (4%) * 0.2. This means we only pay the interest-spread cost for the “most likely mild appreciation,” and treat large-scale exchange-rate volatility (such as dramatic appreciation exceeding 1× volatility) as “systemic risk,” covering it through dynamic rebalancing rather than reserving spread.

Decision factor two: ROE–premium rate matching factor (identifying sentiment mispricing)

If a company’s return on net assets (ROE) remains steady or is in an expansion cycle, then the extreme discount (i.e., the AH premium rate spikes) appearing in the Hong Kong share market actually does not have fundamental logic; it may be mainly caused by a decline in offshore market risk appetite or by tighter liquidity.

We screen for targets with ROE (TTM) > 10% in the 2025 third quarter and continuous three-year ROE growth, and for those with AH premium ranking relatively high. This step aims to anchor the “endogenous stability” of core assets. Against the backdrop of current global geopolitical and macro-cycle fluctuations, enterprises that can maintain continuous three-year ROE expansion prove that they have very strong industry pricing power and operational resilience. Such a continuously upward profit curve forms the stock price’s most solid defensive foundation, excluding “value traps” where premiums are passively increased due to fundamental deterioration.

4

Three variables affecting AH premium in 2026

1. “Second pricing” under energy inflation pressure: premium convergence in resource-related individual stocks

High oil prices are direct positives for the energy and raw materials sectors among stocks listed in both AH (such as China Petroleum, CNOOC, China Aluminum, etc.). But in terms of AH premium performance, it shows an interesting characteristic of “H shares outperforming A shares” (AH premium marginal narrowing).

Hong Kong stocks, as an offshore market extremely sensitive to global commodity pricing, typically restore valuations for resource-related sectors earlier and more thoroughly than A shares. Supported by oil prices above 90 dollars, global long-term capital is more inclined to seek defensive assets in discounted H shares.

This earnings upgrade driven by geopolitics will drive Southbound capital to accelerate buying of significantly discounted energy H shares. Under the influence of geopolitical conflicts, the premium rate of the energy sector may show a proactive contraction; and even some high-quality energy stocks may touch historically lower premium levels.

2. Rate-cut expectations weaken: “valuation suppression” from offshore liquidity

The Federal Reserve’s resilience in maintaining a 3.5%—3.75% interest-rate range is beyond the market’s expectations at the beginning of the year. This is a significant negative variable for Hong Kong stocks (H shares) overall.

Delayed rate-cut expectations mean that the denominator side of Hong Kong stocks (discount rate) cannot decline as scheduled. When U.S. Treasury yields remain volatile at high levels, the liquidity environment for Hong Kong stocks still remains in a “tight-but-balanced” state. In contrast, A shares are mainly driven by domestic monetary policy (currently relatively independent and leaning toward easing), with smaller marginal effects from the Federal Reserve.

For growth stocks that are extremely sensitive to interest rates, such as Hang Seng TECH and biopharmaceuticals, the failure of rate-cut expectations will hinder their H-share rebounds, while A shares may perform more steadily due to domestic policy support. This will cause AH premium for growth sectors not only to fail to shrink in the short term, but may face a phased rebound or remain at a high level of range-bound volatility.

3. Revaluation of “dividend assets” driven by risk-hedging sentiment

Stagflation concerns brought by high oil prices (high inflation + low growth) cause global risk appetite to retreat. In this context, “dividend assets” with extremely high certainty become a refuge for the whole market.

In AH-listed stocks, large financials and public utilities sectors originally already benefit from expectations of dividend-tax relief. Now, with the added uncertainty brought by high oil prices, capital will further concentrate into defensive individual stocks with stable cash flows.

This is a two-way contest. On one hand, high interest rates suppress overall Hong Kong stock valuations; on the other hand, risk-hedging capital craves extremely high dividend yields in H shares. The final result could be that AH premiums in high-dividend sectors enter a “low-level dulling” state—that is, premiums are already very low, but because external liquidity does not loosen, H shares also find it difficult to achieve the final step of “parity premium,” remaining in a modest discount range.

Risk warning

Geopolitical conflict disturbances; U.S. economic growth stalling; global risk appetite declining; overseas demand falling short of expectations

(From the source: Great Wall Securities)