 "China's wealth eludes foreigners")
China's 20-year economic boom has boosted the wealth of its 1.3 billion citizens at the fastest pace worldwide and spawned some of the biggest companies in history. Foreigners earned less than one per cent a year investing in Chinese stocks, a sixth of what they would have made owning US Treasury bills.
The MSCI China Index has gained about 14 per cent, including dividends, since Tsingtao Brewery Co became the first mainland company to sell H shares to international investors in Hong Kong in July 1993. That compares with a 452 per cent return in the Standard & Poor's 500 Index, 322 per cent in the MSCI Emerging Markets Index and 86 per cent from Treasuries. Only the MSCI Japan Index had a weaker performance among the 10 largest markets, losing about one per cent.
While China's shift toward a market economy has lifted per- capita incomes by 1,074 per cent and helped its companies raise at least $195 billion through stock sales in Hong Kong, investors with $695 billion say that corporate governance concerns, competition and state intervention have eroded returns for minority shareholders. Now, as China allows unprecedented access to its local capital markets amid the weakest projected gross domestic product growth since 1990, Aberdeen Asset Management Plc says valuations must fall further before it buys.
Bear market
The MSCI China index fell 0.5 per cent on July 12, bringing this year's drop to 9.7 per cent. The gauge of companies from Industrial & Commercial Bank of China Ltd, the world's second-largest lender by market value, to PetroChina Co, the third- biggest energy producer, entered a bear market last month after falling as much as 22 per cent from this year's high in January.
The Hang Seng China Enterprises Index, a gauge of 40 H shares, has declined 18 per cent this year. It's up 138 per cent, excluding dividends, since Tsingtao Brewery began trading on July 15, 1993. The Shanghai Composite Index of mainland-listed companies has dropped 10 per cent this year and is up 143 per cent during the past two decades.
The nation's stocks have retreated amid a surge in money market rates last month that spurred economists at Goldman Sachs Group Inc and China International Capital Corp to predict GDP will expand 7.4 per cent this year, which would be the weakest annual rate since 1990.
QFII programme
The ruling Communist Party is sacrificing short-term economic growth as it seeks to make the nation's long-term expansion more sustainable, in part by curbing credit, Gary Dugan, the Singapore-based chief investment officer for Asia and West Asia at Coutts & Co, said in a July 10 interview.
"With a new plan to rebalance the economy, we've got something of a cloud over," stocks, Dugan said. China will increase a program for foreign funds to invest in its local financial markets to $150 billion from a previous limit of $80 billion, according to a statement posted on the China Securities Regulatory Commission's website on July 12. The government restricts access to mainland markets through its Qualified Foreign Institutional Investor programme, which has granted firms a combined quota of $43.5 billion as of June 26. That compares with the $3-trillion market value of locally- listed companies.
The MSCI China Index has gained about 14 per cent, including dividends, since Tsingtao Brewery Co became the first mainland company to sell H shares to international investors in Hong Kong in July 1993. That compares with a 452 per cent return in the Standard & Poor's 500 Index, 322 per cent in the MSCI Emerging Markets Index and 86 per cent from Treasuries. Only the MSCI Japan Index had a weaker performance among the 10 largest markets, losing about one per cent.
While China's shift toward a market economy has lifted per- capita incomes by 1,074 per cent and helped its companies raise at least $195 billion through stock sales in Hong Kong, investors with $695 billion say that corporate governance concerns, competition and state intervention have eroded returns for minority shareholders. Now, as China allows unprecedented access to its local capital markets amid the weakest projected gross domestic product growth since 1990, Aberdeen Asset Management Plc says valuations must fall further before it buys.
More From This Section
"China is a case in point that great GDP doesn't mean a great stock market," Nicholas Yeo, a money manager at Aberdeen Asset, which oversees about $322 billion worldwide, said by phone from Hong Kong on July 10. "The lack of quality in terms of corporate governance is one of the main reasons we find why companies don't perform well over the long term."
Bear market
The MSCI China index fell 0.5 per cent on July 12, bringing this year's drop to 9.7 per cent. The gauge of companies from Industrial & Commercial Bank of China Ltd, the world's second-largest lender by market value, to PetroChina Co, the third- biggest energy producer, entered a bear market last month after falling as much as 22 per cent from this year's high in January.
The Hang Seng China Enterprises Index, a gauge of 40 H shares, has declined 18 per cent this year. It's up 138 per cent, excluding dividends, since Tsingtao Brewery began trading on July 15, 1993. The Shanghai Composite Index of mainland-listed companies has dropped 10 per cent this year and is up 143 per cent during the past two decades.
The nation's stocks have retreated amid a surge in money market rates last month that spurred economists at Goldman Sachs Group Inc and China International Capital Corp to predict GDP will expand 7.4 per cent this year, which would be the weakest annual rate since 1990.
QFII programme
The ruling Communist Party is sacrificing short-term economic growth as it seeks to make the nation's long-term expansion more sustainable, in part by curbing credit, Gary Dugan, the Singapore-based chief investment officer for Asia and West Asia at Coutts & Co, said in a July 10 interview.
"With a new plan to rebalance the economy, we've got something of a cloud over," stocks, Dugan said. China will increase a program for foreign funds to invest in its local financial markets to $150 billion from a previous limit of $80 billion, according to a statement posted on the China Securities Regulatory Commission's website on July 12. The government restricts access to mainland markets through its Qualified Foreign Institutional Investor programme, which has granted firms a combined quota of $43.5 billion as of June 26. That compares with the $3-trillion market value of locally- listed companies.