Shares of China Petroleum & Chemical Corp. (600028), Asia's largest refiner, rose to a record after China's government let banks buy shares overseas for the first time.
Shares of Sinopec, as Beijing-based China Petroleum is known, rose 10.1 percent to HK$8.07 by the Hong Kong market's 4 p.m. close. The stock gained as much as 11.2 percent earlier. Commercial banks can invest as much as 50 percent of funds in the qualified domestic institutional investors program, or QDII, in overseas stock markets, the China Banking Regulatory Commission said May 11.
The relaxation of investment rules will help Chinese stocks listed in Hong Kong narrow a valuation gap with their mainland counterparts. Stocks in Shanghai and Shenzhen trade at higher prices because China's government prevents its citizens from investing overseas, including Hong Kong.
``The QDII expansion is very positive for H-share including Sinopec which has dual listings and there is a price gap between A-shares and H-shares,'' said Lei Wang, co-portfolio manager of $12 billion including Sinopec stocks at Thornburg International Value Fund in Santa Fe, New Mexico. ``Sinopec's blue-chip nature and fundamental promise may also increase investors' confidence to own its H-shares.''
Sinopec shares in Hong Kong, or H-shares, have risen 59.8 percent in the past year, lagging behind the 77.4 percent gain in its Shanghai-listed stock, so-called A-shares.
Banks based in China have been approved to invest a total of $13.9 billion overseas, according to the banking regulator. This implies a maximum of about $7 billion available under the QDII for investment in stocks outside mainland China.
The benchmark Hang Seng Index rose to a record today in the market's busiest trading day.
Sinopec, which supplies almost two thirds of the fuel sold in China, halted losses from producing fuels at state-controlled prices in the fourth quarter of last year as crude oil costs dropped. The company said April 15 first-half profit may rise more than 50 percent on increased sales of fuels and chemicals.
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