Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (15064)	11/7/2004 11:52:44 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

The quest for value in China continues - Janet Ong Monday, November 8, 2004 China's stocks, among the only ones to miss a 20-month global rally, may reward investors who are prepared to venture into the nation's partially opened equity market. . "We see value emerging in a range of stocks," said Chris Ruffle, manager of the China A-Share Fund of Martin Currie Investment in Edinburgh, Scotland. "There's an advantage in going in when the market is down. Prices are cheaper." . Ruffle's $80 million fund has gained 18 percent since its inception a year ago, which compares with a 5.8 percent average drop in the prices of Shanghai-traded shares. He holds stocks such as Beijing Yanjing Brewery and plans to invest $30 million more in the market. . Funds such as Martin Currie and banks including UBS, Citigroup and Morgan Stanley have received government approval to invest $3 billion in shares and convertible bonds since China opened its $460 billion of domestic equities to selected investors in May 2003. For the first time, outsiders can buy yuan-denominated A shares, which account for 99 percent of the stock traded on the Shanghai and Shenzhen bourses. . The Qualified Foreign Institutional Investor program has 27 approved investors, each with an investment limit agreed with the government. UBS was the first to be approved and holds the biggest quota, at $800 million. Citigroup is second with $400 million. . . So far, the inflow has not revived the market. China's indexes are the only ones among 60 national benchmarks tracked by Bloomberg that have not gained since March 2003, when Morgan Stanley Capital International's World index began a 56 percent advance. The Shanghai and Shenzhen composite indexes are down 12 percent and 22 percent respectively in dollar terms. . . Financial scandals at companies such as Guangxia (Yinchuan) Industry, which was fined last year for China's biggest securities fraud, helped drive the declines. . Undeterred, Martin Currie will apply for a QFII license "very soon," Ruffle said. Up to now, the company has bought stocks under agreements with UBS and other banks to use part of their quota. Licensees must have at least $10 billion in assets and $50 million to spend. . Credit Suisse First Boston has applied to increase its $50 million investment quota by $700 million, said Josephine Lee, a spokeswoman in Hong Kong. UBS plans to ask for a higher limit, said Nicole Yuen, the bank's head of China equities in Hong Kong. "We have more client demand than our quota," she said. . . Liu Yang, managing director of Atlantis Investment Management in Hong Kong, said she was planning to invest $30 million in yuan shares. . . "We may pick up a few retailers who are good local brand names" as well as port and power operators, said Liu. Stocks she likes include Yibin Wuliangye, a unit of Wuliangye Group, China's largest spirits maker, and China Yangtze Power. . Buying A shares does expose investors to certain risks - not only of scandals and official efforts to steer the economy but also of plans to divest as much as $300 billion of stakes in state companies. At least twice in three years, China has announced plans to start converting its holdings into traded shares, only to retreat as prices slid on concern that the market would be swamped with stock. . "The main problem is the high valuation and quality of the companies," said Flavia Cheong, who manages about $3.3 billion at Aberdeen Asset Management in Singapore. "We haven't found any stocks that meet our price or quality criteria." Aberdeen will keep looking, though. The size and potential of China's market makes it too big to ignore, Cheong said. . iht.com