I think most investors are aware of the risks of investing in China. These risks include a number of disturbing cases of companies failing to report properly and a couple of years after a US debut collapsing with huge losses. But at the same time China is the country with the greatest growth potential for the next 10 years. A story today is the Wall St Journal caught my eye and shows how China is trying to support the market with regulations opening the playing field. I think its a risky area and would hesitate to buy individual stocks and would look for a player with experience in the market such as Firsts State who I have written about before who have a China fund. See extract from WSJ below.
Chinese stocks hit three-year lows in the past month, leaving many shareholders nursing heavy losses. But many are sticking around, betting the market regulator's efforts to attract more funds will reverse the slide.
Since the start of August, stocks have crept higher but not enough to put China's market in positive territory. It remains the only major Asian market down for the year, with the Shanghai Composite Index down 1.9%. Last month, the index hit its lowest point since March 2009.
With the market heading for a third year of losses, the stock-market regulator is stepping in. In most developed markets, regulators tend to stay above the fray. But with so many individual investors in the market, China worries that an extended fall could cause financial turmoil.
Last week, the China Securities Regulatory Commission cautioned against panic selling and stressed the attraction of low company valuations. It has also cut transaction fees on stocks.
Other steps this year include expanding investment quotas for non-Chinese buyers and allowing yuan that trades offshore to re-enter the country to buy shares, both of which would likely contribute to more buying.
"I am still very hopeful about the impact of the measures," said Fung Kwok On, chief portfolio manager for Greater China equities in Hong Kong at Nikko Asset Management. However, he said it may take two or three years for the impact to be felt, as moves by the regulator to delist some poorly performing companies may add to nervousness in an already cautious market.
The regulator also plans to introduce more long-term institutional investors to the market. These include pension funds, which have only about 10% of their assets in stocks, compared to nearly 40% in the U.S., according to Fortune CLSA Securities.
Meanwhile, two recent interest-rate cuts, as well as the launch of a fresh stimulus package, are being taken as signs that the government is starting to loosen policy to revive the economy, which may help corporate earnings and in turn kick-start the stock market.
Chinese stocks hit three-year lows in the past month, leaving many shareholders nursing heavy losses. But many are sticking around, betting the market regulator's efforts to attract more funds will reverse the slide.
Since the start of August, stocks have crept higher but not enough to put China's market in positive territory. It remains the only major Asian market down for the year, with the Shanghai Composite Index down 1.9%. Last month, the index hit its lowest point since March 2009.
With the market heading for a third year of losses, the stock-market regulator is stepping in. In most developed markets, regulators tend to stay above the fray. But with so many individual investors in the market, China worries that an extended fall could cause financial turmoil.
Last week, the China Securities Regulatory Commission cautioned against panic selling and stressed the attraction of low company valuations. It has also cut transaction fees on stocks.
Other steps this year include expanding investment quotas for non-Chinese buyers and allowing yuan that trades offshore to re-enter the country to buy shares, both of which would likely contribute to more buying.
"I am still very hopeful about the impact of the measures," said Fung Kwok On, chief portfolio manager for Greater China equities in Hong Kong at Nikko Asset Management. However, he said it may take two or three years for the impact to be felt, as moves by the regulator to delist some poorly performing companies may add to nervousness in an already cautious market.
The regulator also plans to introduce more long-term institutional investors to the market. These include pension funds, which have only about 10% of their assets in stocks, compared to nearly 40% in the U.S., according to Fortune CLSA Securities.
Meanwhile, two recent interest-rate cuts, as well as the launch of a fresh stimulus package, are being taken as signs that the government is starting to loosen policy to revive the economy, which may help corporate earnings and in turn kick-start the stock market.
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