AN unprecedented amount of money is flowing into the largest exchange-traded funds (ETFs) that track Chinese mainland companies listed in Hong Kong, as investors bet the biggest rally in more than three years will continue.

    The Hang Seng H-Share Index Fund lured HK$20.5 billion (US$2.6 billion) in April, the largest monthly inflow since at least 2010 and the third-most among equity ETFs globally. About HK$29 billion has been added to the fund during the past four months in the longest stretch since 2013 as assets grew to HK$57.1 billion.

    Mainland companies trading in Hong Kong will narrow the discount to their dual-listed counterparts on the mainland as the rally spreads to the H-share market amid expectations for more monetary easing in the world’s second-largest economy, according to UBS AG.

    While the Hang Seng China Enterprises Index soared 17 percent in April, the most since October 2011, A shares on the mainland are still trading at a 31 percent premium to stocks in Hong Kong.

    “The H-share market still has room to go higher based on momentum and liquidity with the monetary easing measures,” said Jorge Mariscal, chief investment officer for emerging markets at UBS in New York. “That valuation gap between A and H shares is going to close. Investors are expecting the monetary easing will continue, and the economy will stabilize down the road.” (SD-Agencies)