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Small Cap Chinese Stocks Back In Favor

May 31, 2011 12:18 PM ETYONG, MS, CHINA
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 This morning, it was announced that Morgan Stanley (NYSE:MS) in Asia invested $50 million in Yongye International, Inc. (NASDAQ:YONG). This is a significant investment for a company only valued at approximately $250 million. In addition, it is catching Wall Streets eye because of the recent problems in many Chinese stocks. Over the past few months, stocks like China MediaExpress Holdings Inc. and China Agritech Inc. along with countless others have been halted and delisted due to shady, fraudulent accounting practices. This has caused almost all Chinese stocks to be punished and trade at tiny multiples. Investors have stayed away from small Chinese stocks as they fear more shady companies are lurking. However, today may be the turning point. Investors may start to flood back into Chinese small caps, following Morgan Stanley. Hedge funds may also follow suit and jump in.

Gareth Soloway

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