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Commentary from a Fund manager
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singaporegal
Supreme |
28-Feb-2007 20:36
Yells: "Female TA nut" |
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The problem with the Chinese market is that the Chinese government tends to make regulations and policies suddenly and without warning. In a globalised market, this creates a very unstable trading environment. |
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gadrj76
Member |
28-Feb-2007 12:09
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China's domestic stockmarket (i.e. the market limited to local investors) fell nearly 9% in trading today. The fall came a day after the main index jumped to an all-time high (up 14% year to date after a 130% rise last year). I attach a note from a Chinese fund management team on the reasons for the fall and more importantly, their views on China going forward. In addition, should you have queries on the various types of Chinese stocks available for investments, the attached slides give a good overview. Today's Fall in China Stockmarket First, to be clear, this is the Shanghai onshore (A share) market which is not available to foreigners except through a special arrangement with the government (QFII license). The broader market, which includes H shares and red chip shares, and which is open to foreign investors, is down only 2-3%, and Hong Kong is down around 2%. There are a lot of rumours in the market. These rumours, coupled with a loss of momentum following the Chinese New Year, have caused some negative sentiment. The rumours include: the government may implement new measures to limit speculation in the market; the government may introduce capital gains tax on securities; and that the head of the CSRC (Chinese regulator) will step down. There are other rumours as well. These rumours have caused a ripple in a market which has seen a huge influx of liquidity in the last 6 months. These inflows have driven up valuations significantly and we feel that some shares are very stretched. As the market drops, it has created more selling and further rounds of redemptions and further rumours. Exaggerating the impact of this is the fact that fund managers on-shore typically act in unison. The China market has a limit of max 10% down in any one day. We do not believe a lot of these rumours are credible at this early stage. However, we are monitoring what is happening. Our exposure is in the consumer and infrastructure sectors which have moved in line with the market. While we may seem some volatility, we still believe that China remains a great long-term story and there are a number of very interesting bottom-up opportunities. |
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