scope of investment in china

8/9/2019 Scope of Investment in China

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Emerging markets

, , , ,Himanshu Neha Kinshoo Anish Sethu


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Contents

Definition Why invest in Asian Markets

Why China

Revaluation risk

Conclusion


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efinitionEmerging markets are countries that arerestructuring their economies along market-

oriented lines and offer a wealth ofopportunities in trade, technology transfers,and foreign direct investment.


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INVESTING IN ASIAN MARKETS

Strong & sustainable sources of

yield Synonymous with growth- growth in

the region is now forecast at anannualised rate of 7 per cent over

the next five years High dividends due to

better capital management

improved corporate governance

Investment strategy- focus on

dividends of companies/stocks.

: :// . . / / +Source http www asiaone com Business My Money

/ + + + / + +Building Your Nest Egg Investments And Savi

/ / - .ngs Story A1Story20091125 182237 html


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China remains favorite.

China's economy is growing at anannualized rate of 9-10 percent while theUS economy is at 3-5 percent "normally".

The Chinese stock market, as often

measured by Shanghai stock exchangecomposite index, has been the best

performing stock index in the world so farthis year

Better Corporate Governance. Eg. ChinaSecurities Regulatory Commission

(CSRC)


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Political condition

except for 1989 never faced any seriouspolitical competition.

A recent regulatory change which allowed

large chunks of savings to be invested inthe stock market .

Tax- incentives to attract ForeignInvestment.

Opening up of Govt Sector. Eg. China LifeInsurance Company, parts of thesecompanies are spun out to publicshareholders to raise funds for expansion


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Geographical Reasons..

the existence of natural resources,

access to the seaports and inlandwaterways.


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Economic conditions- China

The Chinese economy continues to grow --it expanded by 7.9% in the second quarter

Bank lending is at high levels

Interest rates are low

Buying out of the money call options-most likely to benefit


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Attractive Economic factors..

China ranks above other emerging markets inthe World Banks Ease of DoingBusiness annual ranking.

Top 5 global destinations of FDI Chinas economy will continue to be over-reliant

on exports. Chinese Gross Domestic Savings continue to be

high.

Chinas share of inward capital declines &outward capital increased. Leading destination for portfolio equity

investment.

Source: National Bureau of Statistics of China, World Bank, Global


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Investment Risks

Volatility is one big risk in the Chinese stockmarket

e.g..9% stock market sell-off in China on Feb.

27, 2007. China still limits foreigners' purchases of the

Yuan-denominated stocks that make up thebiggest share of the markets.

Revaluation Risk of China Currency. China is still a communist country, the rules

and regulations for public company tradingand reporting are extremely different

REVALUATION RISK


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REVALUATION RISK

The official currency of the People's Republic of China (PRC) isRenminbi

During the previous decade, Mainland China's Currency was peggedto the U.S. dollar at 8.28 RMB.

On July 21, 2005, it was revalued to 8.11 per U.S. dollar, following

the removal of the peg to the U.S. dollar.

The PRC government has resisted pressure to increase the value ofthe RMB

Appreciation of the yuan would cause the PRC government to buy

fewer United Statestreasury bonds


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Conclusion

In recent years, China has boasted arapidly growing economy. The odds thatChinese companies will continue to do

well seem good, but there are a numberof pitfalls for the individual investor.Before investing in a Chinese company,

be sure to find out how it operates andwhether it is likely to act in the bestinterest of its shareholders.


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scope of investment in china

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