Sinotrans 598.HK

I bought Sinotrans 中国外运 (598.HK) at HKD1.60 recently --- an absolutely low value, and I should likely invest in this stock for the long haul. 

The current price of 中国外运 Sinotrans A share (601598) is RMB 3.59. Converting to HKD, it is 3.59*1.1255= HKD4.040546.

Compared to 中国外运 H share (958.HK) at the closing price of HKD1.70 today, 溢价(A/H), or excess price A-to-H price ratio, is 4.040546/1.7 = 2.3768. If we can arbitrage this share by buying the H share in HK Exchange and selling it to Shanghai Exchange as A share within the same day, this is like a surge of 137.68%.

Or put it simply, you enjoy the same absolute dividend whether you invest in 中国外运 H share (598) or 中国外运 A share (601598), but the yield in H share is around 10% quite consistently in the past few years at this current price but in Shanghai Exchange, the A share will only yield (10/2.3768)% or 4.2%. Obviously 4.2% yield is still attractive enough to Chinese A share investors given the current low interest rate environment.

But if we can try to pay for a stock valued at 137% more immediately by buying 598.HK today and this will mean if China A share investors can enjoy 4.2% dividend yield, you can pocket your 10% yield should the company be able to maintain its performance in the middle to long term. 

If the excess A-to-H price ratio can be reduced to parity, your capital gain is 137.68%. 

Superphang

http://superphang.blogspot.sg