Michael McCormack, executive director at China-focused fund consulting firm Z-Ben Advisors, told Reuters that foreign investors are now trying to "rebalance" the fundamental mismatch in their portfolio between their direct exposure to Chinese equities and the role China plays in the global economy.
Foreign investors' enthusiasm about Chinese equities seems to stand in sharp contrast to the attitude of the vast army of domestic investors and punters who have remained shell-shocked by the market free fall in recent months. Talking to the crowd milling around every day at the large reception hall of a local stockbrokerage, a China Daily reporter filled her notebook with negative quotes showing nothing but mistrust and frustration.
A 50-something retired teacher told our reporter that she knows and cares nothing about the economy. All she cares about is the daily movement of the index. "When it goes up I am happy and when it goes down I am depressed," she said, prompting a roar of laughter from the crowd around her.
The consensus of the young and not-so-young investors in that hall lined with TV screens flashing the latest stock prices was this: Don't do anything now, wait and see what's going to happen next year.
By then, they may have to pay a high price to buy from the smart investors who are picking up the bargains now. But of course, not all shares are equal. "There is lots of stuff (in the Chinese stock market) that's cheap - some has recovery potential but then some is cheap for a reason," Stuart Rae, chief investment officer of Pacific Basin Value Equities at AllianceBernstein, told Reuters.
So, be warned.
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