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An inborn speculator. Investing is a game of calculating expected value.
  • Investing In China ETF ? 0 comments
    Jan 1, 2013 4:51 AM

    In the mid to late December, the hottest news in Hong Kong market was not "Fiscal Cliff". As Hong Kong Monetary Authority has been purchasing USD and selling HKD after QE3, the market is full of liquidity these days.

    Meanwhile, China A shares reached a short-term bottom. Some said the main contributor was that the politics climate in China became stable after the leadership handover, attracting investors back to the market. Some said China's SFC allowed foreign capital to flow in and boost the markets.

    My view is that the market outlook was "too negative" after Shanghai Composite Index broke 2,000 points level, which the market called "Super Support number". (Of course, this is only superstition.) Most weak-hand holders sold all shares in their hands. Only the smart money stayed in the market. Hence, A-shares CSI 300 rebound 16% within a month.

    That Hong Kong and foreign investors purchased A-shares related ETF hardly was a crucial catalyst. You can see that most financial news telling us how much "smart money" flows in China, We can follow them and gain a lot in 2013 in the Greater China.

    Yes, China is a great investment idea as it developed very well in last decade. However, that does not mean it can continue. More importantly, we should know that the foreign investing rules are not suitable to apply in this country. The critical reason behind is that the propensity of the West Corporation is based of "innovation" and "efficiency". But, the propensity of the Chinese Corporation is based of "scalable" and "monopoly". I will disclosure more facts that you cannot read in Financial Times and Wall Street Journal in later articles.

    A-shares ETFs are not like any index-ETF traded in New York Stock Exchange. The fundamental earning power of the Chinese Corporation, especially the Chinese Enterprises is from rent-seeking rather than value-creating. In this stage, A-shares are still not a good investment tool for outsiders.

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