China's central bank has given the nod on the QDII2 scheme to allow wealthy individuals to allocate overseas, and is further liberalising offshore investment via the Shanghai free trade zone.
Investors must be quick to sell H-shares and buy A-shares via the Shanghai-Hong Kong trading link to avoid losing the premium on HK-listed stocks, says the equity broker.
Pre-trade checks and stock transfer restrictions are cited as particular problems for long-only managers who will look to trade A-shares via the Hong Kong-Shanghai stocks link.
CSOP Asset Management's head trader expects the planned Shanghai-Hong Kong trading link to attract greater volumes to the Shanghai Stock Exchange and reduce issues over liquidity.
Interest in the A-share/H-share spread trade is tipped to rise come October, when the Shanghai-Hong Kong Stock Connect goes live, but profitability of the transaction may fall as a result.
Authorities release draft regulations for the pending scheme to link the two bourses, although updates on taxation and how trades can be placed are still to be announced.