The valuation of Hong Kong stocks is at the lowest level in the world.

On August 18, the Hang Seng AH Premium Index once hit a new high this year, reaching 137.83 points. It closed at 137.21 points throughout the day, a slight drop of 0.03%.

At the end of April 2020, the Hang Seng AH stock premium index hit 122.21 points, the lowest point in nearly a year. Since June, the premium index has continued to rise, reaching a new high for the year yesterday.

Picture Source: Straight Flush

The Hang Seng AH Premium Index intuitively reflects the difference between the trend of A shares and Hong Kong stocks. Since June of this year, the trend of A-shares and H-shares has clearly diverged. From June 1 to August 18, the Shanghai Composite Index rose by 20.99%, while the Hang Seng Index rose by only 10.48%.

Comparison between the Shanghai Index and the Hang Seng Index since the beginning of this year; Source: Straight Flush

Looking back at the Hang Seng AH Share Premium Index, we will find that A shares have a long-term premium over H shares. The Hang Seng AH stock premium index closed at 133.24 points on the first day of its release. Starting from mid-June 2010, the premium index fell below 100 points, and the average price of A shares Has basically been in line with H shares. However, in recent years, Hong Kong stocks as a whole have been cheaper and A-shares more expensive.

Yesterday, it hit a new high of 137.83 points for the year, which means that the current overall premium rate of A shares to H shares is 37.83%.

So are A shares too expensive or Hong Kong shares too cheap? Obviously the latter. Data on August 18, The current Shanghai Composite Index PE is 15.24, compared with 25.4 times PE of Nikkei 225 Index and 33.49 times PE of S&P 500 IndexThe valuation of is still at a low level globally. However, it should be noted that the current PE of GEM is 71.92, which is in the highest range in history and is not an underestimation. The Hang Seng Index PE is only 11.05, the lowest level in the world.

So which Hong Kong stocks are cheaper and the AH premium is more serious?

First of all, from an industry perspective, according to previous statistics from Huatai Securities, the highest AH premium is in industries such as textiles and garments, national defense and military industries, building materials, and banking, home appliances, and real estate. The premium level is the lowest.

AH sub-industry premium status

In terms of individual stocks, according to the data on August 18, the five stocks with the highest AH premium rate are Luoyang Glass, Zhejiang Shibao, Shandong Molong, Xintian Green Energy, and China CITIC Construction Investment. The premium rates are all over 400%, the highest The premium rate of Luoyang Glass is 506.38%. The five stocks with the lowest AH premium rate are Tigermed, Ping An of China, China Merchants Bank, Weichai Power, and WuXi AppTec. The premium rate is below 7%. The lowest premium rate of Tigermed is 4.03%.

Drawing: