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I wanted to mention some information regarding the Chinese stock market when I interviewed a professional investor friend of mine for some research I am doing for a university.
It points towards a weakening dollar over the next year and a quarter which is in line with the thoughts of some of the reports I recommend in the early posts of this blog, such as that of Mizuho corporate bank.
China’s mainland has a large number of retail investors and big money investors and as you may or may not know the economy has been booming - just do a top-performing fund search on www.morningstar.com and you’ll see what I mean.
Now the Chinese stock market is comprised of all the Chinese markets Hong Kong, Shenzhen, Shanghai, Taiwan, but the Chinese were only allowed to invest in what are termed A shares. B shares were for foreigners. When the Chinese government allowed B shares to be traded by both mainland Chinese and foreigners, the B share market went from being so illiquid that hardly any investors invested in China, to bullish and more liquid.
Similarly, China mainland market participants could trade in A (in Chinese RMB currency) but could not trade in H shares in US or HK dollars.
However due to a Chinese government policy change about one month ago, mainland investors will be able to invest in H shares across the Hong Kong stock exchange.Â
My personal view is that over time from NOW, the value of H shares will go up particularly for companies that are mainland Chinese but listed on the Hong Kong stock exchange. I cannot comment for Hong Kong blue chips (Hang Seng index). So I think that the possibility of investing in China and Hong Kong is far from over, despite a lot of people talking of the market being overbought and toppish. I believe there is still potential and I have invested more money today.
Before I did this I called up a friend of mine who is the fund manager of two of the most successful funds with top ten holdings in Chinese mainland and Hong Kong stocks to ask his views about this.
He is neither a technical chartist or a fundamental analysis manager. He is a traditional, call up the companies and find out what is happening…if they’re not being transparent, then make them be transparent kind of guy.
And his results speak for themselves…
He supported my thoughts on the Chinese stock market, pointing out though, that rather than it being neccessarily wise to invest in H shares, the market will certainly be increasingly in liquidity due to the new investors coming in to the market.
For the US dollar, I believe this will bring continued woe over the course of the duration.
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