THE days of paying different prices for the same stock in Hong Kong and Shanghai are numbered, according to Morgan Stanley.

    Valuation gaps between dual-listed shares will disappear as an exchange link between the two cities leads to the creation of a “one-China” market, Jonathan Garner, the head of Asia and emerging-market strategy at Morgan Stanley, said Tuesday. Yuan-denominated A shares on the mainland are valued at a discount of about 7 percent versus Hong Kong counterparts, known as H shares, according to the Hang Seng China AH Premium Index.

    “We’re looking for A-H stock price convergence,” Garner said. Over time, the gaps “will effectively come down to zero,” he said.

    While the Shanghai Composite Index has rebounded 11 percent since mid-March on speculation government stimulus will revive growth in the world’s second-largest economy, the gauge has lagged behind a 20 percent surge in the Hang Seng China Enterprises Index of H shares. The planned tie-up, scheduled to start around October, will give foreign investors unprecedented access to the mainland market while opening a route for wealthy mainland investors to buy Hong Kong stocks.

    Valuation gaps between the two bourses July 23 reached the widest since 2006. (SD-Agencies)