Emerging market stocks, as measured by the MSCI EM Index, have seen more than a quarter of their value wiped out in the past four months, led by the travails of the Chinese stock market. We are not saying that now, or next week, or next month will represent the ideal buying point. We believe there is further disruption ahead, with suggestions that the devaluation by the Chinese central bank in August did not go far enough, and with others calling for a more profound market-clearing event to cleanse the final remnants of the price inflation seen earlier this year.
Many have been trying to call the bottom of the market; what we would say is that we are beginning to see tentative indications of discrete, selective buying of the babies that have been thrown out with the bathwater. We don’t think there is ever a bad time for rigorous, bottom-up analysis of companies exhibiting strong fundamentals. We do think that now looks like a particularly good moment to put old-fashioned research skills to work, and particularly in China. Read more
By Edward Tse, Gao Feng Advisory Company
China’s recent stock market turbulence and currency devaluation has attracted enormous attention from around the world—with a disproportionate amount focused on whether we are seeing the end ofChina’s growth story.
True, many people lost a lot of money (though doubtless some also made a lot) and the reputation of the country’s economic managers has been badly damaged. The aftermath resulting from the meltdown will likely continue to be felt for at least several months, particularly by those private sector companies which have had to shelve plans to raise funds via initial public offerings. Read more
Red is a lucky colour in China, which is why share price displays go red when prices are rising. A green display means prices are falling, the opposite to stock markets elsewhere. There is a similar discontinuity between the short-term impact of China’s recent 30 per cent stock market collapse and the concern of some western analysts that the government may see this as a reason for reversing President Xi’s New Normal programme of economic reform.
We do not expect this to happen. Rather, we see the aftermath of the collapse as a further playing out of the on-going factional struggle between the Princelings represented by President Xi and the Populists represented by Premier Li. If anything, it will strengthen Xi’s hand over the medium term, as the stimulus policy of the Populists is further discredited. Read more
Guo Guangchang, an entrepreneur who claims inspiration from China’s oldest sages - as well as from the “sage of Omaha”, Warren Buffett – has topped an inaugural ranking of the wealthiest Chinese investors with a personal fortune estimated at $4.5bn.
Guo (above), 48, typifies the eclectic acquisitiveness of China’s emerging cohort of investors. His company, Fosun International, this month won the longest takeover battle in French history by beating Italian investor Andrea Bonomi to take control of Club Méditerranée, the vacation organiser, after a 16-month wrestling match. Read more
Shares on the Shanghai stock exchange have climbed 22 per cent in the past month. fastFT’s Naomi Rovnick explains to Jonathan Wheatley, deputy emerging markets editor, how this is being driven by falling property prices and lower interest rates.
By Christina Ma of Goldman Sachs
China is about to set another milestone in its long journey of financial market liberalisation. The Shanghai-Hong Kong Stock Connect, to be launched on November 17, will for the first time allow international investors to trade shares directly in China’s stock market without applying for an individual quota.
Although the programme will initially cover select stocks listed on the Shanghai exchange, its implications are significant. By providing direct access to the Chinese market, it essentially knocks a hole in the Great Wall that has historically separated shares for domestic investors and shares made available to international investors. More importantly, Stock Connect paves the way for China’s stock market to debut on the stage of international relevance, something that has eluded it despite its massive $4.8tn market capitalisation. Read more
It’s that time of the year again where visitors to China are deafened by firecrackers, mobbed by mass ranks of red-capped tourists, and overcharged for, well, everything. The year of the slippery snake is drawing to a close, the year of the galloping (and in 2014, wooden) horse is upon us.
But it’s also when CLSA gets one of its analysts to use their feng shui compass to figure whether this year’s qi will be good or bad news for investors. Read more
China’s IPO season has officially reopened. Five companies said on Tuesday they had received approval from the China Securities Regulatory Commission to issue new shares, bringing China’s longest ever IPO drought to an end. Read more
The week in emerging markets, including our most read, five things we have learned and some long reads for the weekend. Plus the week in a chart: the Shanghai Composite. Read more
Markets rallied on China’s latest reform proposals. But Robin Wigglesworth, capital markets correspondent, warns that while the country’s potential may be enhanced, stock markets will not be and growth could slip below 7 per cent.
Initial reactions to the statement that came out of China’s third plenum can be summed up in three simple words: ‘was that it?’ Investors bemoaned the lack of details, and sent Chinese shares lower by 2 per cent on the day following the release of the document.
Fast forward to Friday, and Chinese equities are spiking. So have minds changed? Read more
It is getting hard to find bargains in developed markets. China has plenty of cheap stocks – but James Mackintosh warns that they may be a bet on the scale of reforms likely to follow this weekend’s Communist party meeting.
Death may not just be a “delightful hiding place for weary men”, as Herodotus once said. It may also offer shelter for Asian investors who have grown tired of looking at battered banks and boring oil producers.
Fu Shou Yuan, a chain of Chinese graveyards, is seeking to list on the Hong Kong stock exchange later this year, in a deal that could raise up to $200m. Read more
By Sammy Suzuki of AllianceBernstein
China has been an incredible engine of manufactured exports over the past decade and the central player of the Brics era. But mounting competition from other countries is gradually pulling production away from China. How should investors proceed? Read more
The week in emerging markets, with: our most read stories, five things we have learned, our favourite long reads, image of the week, and the week in a chart – this week: the Hang Seng and Shanghai Composite.
After all the furore this month after Lou Jiwei, China’s finance minister, suggested the country’s growth target was 7 per cent – and not the official 7.5 per cent – Premier Li Keqiang has weighed in.
Li was reported by Xinhua news agency as saying growth would only be tolerated above… 7 per cent. Given that China’s growth targets in recent years have been more of a bar to surpass than a bullseye to hit, this sounds suspiciously similar to Lou. Never mind – stocks rallied at the news. Read more
China stocks ended the week with a bit of a flourish on Friday, with the Shanghai Composite up 1.5 per cent at 1,979.20. Overall, it meant that the index finished the week around 2.5 per cent down, far better than it had looked earlier on Tuesday and Wednesday amid fears of a China credit crunch.
So after the PBoC’s credit policy U-turn, is everything ok? Perhaps not. Read more
Top of the world…no more
In the far-off days before the global crisis, there were as many as five Chinese companies in the world’s top ten by market valuation. Now there are none.
Even though the Chinese economy is about 75 per cent larger than it was at the end of 2007, the poor performance of the country’s stock market has held back its companies’ advance in the world rankings. Meanwhile, the surge in US equities has propelled American companies back to global dominance. Despite the continuing emergence of emerging markets, all 10 of the top 10 are American. Read more
China’s markets stabilised on Wednesday, with interest rates easing in the crucial interbank market and stocks slipping slightly in uneventful trading.
But along with the stability, there is gloom. Equity investors are increasingly worried that slower growth and tighter credit is bad news for stocks: they’ve now fallen to their lowest since January 2009 and the depths of the global financial crisis. Read more
Central Huijin Investment, a Chinese state-owned investment company, has bought stakes in six of the country’s largest financial groups in a bid to deliver a confidence boost to the tumbling domestic stock market in a slowing economy with interbank liquidity problems.
But whether it will succeed is doubtful. Read more