(Adds monthly detail)
SHANGHAI, Nov 28 (Reuters) - Hong Kong shares ended November slightly down, despite an ongoing rally in mainland indexes and in Hong Kong-listed Chinese companies.
China stock indexes rose for the seventh straight session on Friday and posted their biggest monthly gains in nearly two years, led by banking shares on speculation that a deposit insurance scheme would be unveiled soon.
The A-H share premium index, measuring the difference in price between dual-listed firms in Hong Kong and Shanghai stood at 106.68 at the close, its highest level since August 2013. A level over 100 implies that Hong Kong shares are trading at a premium versus shares in the same company listed in Shanghai.
The launch of the Hong Kong-Shanghai mutual market access programme was supposed to eliminate this premium by allowing investors in both markets to buy shares in the other, theoretically allowing arbitrage to erase the price difference between markets.
Instead, unbalanced flows between the two markets may be contributing to further distortions, given that Shanghai bound flows have far exceeded southbound flows every trading day since the programme launched on Nov. 18.
Chinese investment flowing from Shanghai into Hong Kong through the mutual market access pilot programme took up only 0.29 billion yuan of the 10.5 billion yuan daily quota , while foreign investment flowing into Shanghai from Hong Kong through the mutual market access pilot programme took up 2.35 billion yuan of the 13 billion yuan daily quota.
The Hang Seng index fell 0.1 percent on Friday, to 23,987.45, up 2.38 percent for the week but still not regaining levels from the beginning of the month.
Analysts say foreign investors are increasingly cautious about the sustainability of a rally on mainland indexes, which appears to be driven increasingly by expectations of monetary easing as opposed to fundamentals.
The China Enterprises Index gained 1.2 percent on Friday, to 11,145.39 points, largely lifted by Chinese banks and insurers, to end the week up over 6 percent, and up 3.6 percent for the month. (Reporting by Pete Sweeney; Editing by Simon Cameron-Moore)