As the battle for control of China Vanke has raged, Hong Kong-listed H shares in the residential developer have been under pressure while its Shenzhen-listed A shares were suspended. Since the A shares’ Monday reopening the H-share discount has closed, yet it remains wider than the dual-listed average of 25 per cent.
That is strange. True, the A shares have been the favoured vehicle to control the company. But the H shares — one-tenth of the company — have disproportionate sway over a proposed deal to buy assets in exchange for new A shares that could decide where that control ultimately lands. Each share class must pass the deal by a two-thirds majority. The relative undervaluation of the H shares hints at gloomy prospects for the company. While the deal would entrench existing management and be dilutive, the distraction of an unresolved control dispute could be more damaging still.