China Finance Review

Stock Market: Chinese investors face “restructuring”

16th February, 2010

Among the traditional Chinese zodiac, tiger has a “king of beasts in the” reputation, and tiger is a symbol of a vibrant and dynamic. This allowed Chinese investors to have the full of expectations to the Tiger in the stock market.

From the stock-index futures to the international market, the Chinese stock market will usher in the Year of the Tiger from the mechanism of significant changes to the structure. The Chinese investors have to face, not only these external changes, but also its own investment philosophy to complete the “transformation.”

Transformation: from the “long market” to “short market”

Year of the Tiger, stock index futures market in China will undoubtedly be one of the hottest news. Despite the high threshold makes the most of the investors miss the index futures, but that does not prevent them from major financial innovations of this period. Because, as a mature international market risk management tools, stock index futures markets in mainland China have been given a non-ordinary mission – to lead the A-share market by the “only long market” into “short era.”

“In the past one can only make money from the stock market rise, which makes the market players involved to push stock prices higher. The introduction of stock index futures, investors will not be blind pursuit of high-sell in the stock market and able to avoid big ups and downs. “Shanghai investor said.

“China’s stock market has become the world’s most volatile markets, but as a complement and extension of the stock market, stock index futures are an effective mechanism to address the high level of shock.” Zhu Yuchen, general manager of China Financial Futures Exchange, said, China’s stock market index futures is a “necessity” rather than “luxury.”

Shanghai TX Investment Consulting Chou Yan Ying, chief analyst believes that the current price-earnings ratio in Shanghai and Shenzhen stock markets were as high as 25 times and 42 times, even as a dynamic emerging market can have a certain premium, A-share market valuation is still high.

The introduction of stock index futures, in addition to hedge by short selling mechanism to play a role in the price of its distribution capabilities with the market is expected to help gradually return to a reasonable valuation range, and effectively to curb market volatility.

“For ordinary investors, this will be a ‘long-term positive’.” Chou Yan-ying.

Transformation: From “semi-closed market” to “an international platform”

In looking forward to buy HSBC, Siemens, Coca-Cola and other multinational stocks, the Chinese investors who also have such concerns as: the global financial crisis has not receded, the international markets have introduced conditions?

Such expectations and concerns coexist, or will be accompanied by an international board and advance the entire building process, and thus throughout the Year of the Tiger.

Geng Liang, Chairman of Shanghai Stock Exchange appears to have rich resources of China’s capital market, listing a special development advantages, but as China’s capital market has become the world’s major markets, “important base.” In this sense, Shanghai, blue chip market should have the means to become an international market.

Many investors probably do not understand, well-developed international companies outside the stock market has become one of the hallmarks of success in mature markets. As the world’s leading stock exchanges in London and New York Stock Exchange, have also to attract the largest number of foreign companies listed on exchanges.

In fact, many Chinese investors who invest in foreign companies also have their own needs, some people even use the opportunity to travel abroad to open an overseas accounts in order to achieve diversification purposes. Hongyuan Dr. Cheng Wenwei view, rather than let these capital at great risk through “gray channel” out, it is better to open the door, through lawful international panel of channeling those funds to invest in high-quality overseas companies.

“Building an international board for China in a ’sleeping’ in a large share of global capital providers to create opportunities for economic growth, thereby avoiding the single market of the investment risk. More importantly, the international board is conducive to regulatory control of domestic capital investment, international enterprises domination and supervision of the initiative is conducive to capital, legal and orderly flow. “Cheng Wen-wei said.

It is reported that the current international system board, the rules are in full swing in the formulation and revision, the relevant technical issues are also improved. If the birth of the international panel in 2010 to “natural delivery,” the Chinese Year of the Tiger,  shareholders will be able to witness and participate in China’s stock market is another big major transformation: from the “semi-closed market” to “an international platform.”

Transformation: From naive to sophisticated, from the blind to rational

Year of the Tiger, to coincide with the Shanghai and Shenzhen Stock Exchange celebrate her 20th birthday. With the new China stock market is entering the “twenties of the Year”, the Chinese investors will also face from naive to mature, from the blind to rational self-restructuring.

Born at the beginning, the Chinese stock market has a “retail-based” features. 20 years, the rapid growth of the size of the capital market, but also triggered a wave of “national stocks,” the globe. At the same time, the lack of expertise and investment mentality, immaturity, as well as financial strength, the weak position of information channels, making the investment behavior of ordinary investors often misunderstand: listen to rumors, speculation follow suit blindly chase, panic kill or … …

In the one to “the stock market bubble burst” as the theme of the survey, 32% of investors said “do not worry,” 27.8% said “do not care”, there is more than one percent of investors are totally unaware of “bubble” of the mass . Experts have written that same kind of gambling rather than a rational manner, it is “national stocks,” the hidden location.

After the recent three years CBBC converted, more and more investors are beginning to realize, make a “silly money”, make “quick money” has been in the past, the future investment opportunities will be more based on on the fundamentals of observation and research.

In many market participants point of view, investment philosophy of the mature, not only to improve their own quality conscious investors, but also depends on market structure and institutional system of rational perfection, including a hedging mechanism to guard against systemic risks, and the establishment to meet the various investor demand for multi-level capital market.

In this sense, China’s stock market in the Year of the Tiger’s “transformation”, or to contribute to China’s roads are exposed to a very significant growth in the “transformation.”