US, EU Investors Now Interested in China's Banks -- Barron's Blog

        By Shuli Ren
        HSBC met with investors around the world in the last three and a half weeks and noted a markedly increased interest in Chinese banks from investors in the US and EU, who have been most bearish towards China's banks in recent years.
        In my last weekend's column " Bullish on China's Banks", I argued that Chinese financials, brokers in particular, have been a popular beta play on more monetary easing policies after the People's Bank of China launched a surprise interest rate cut in November. I also argued it was about time to rotate into banks instead.
        China's A-Share stock market has been on a bull run since the PBoC's rate cut on November 21, with the Shanghai Composite Index up 22.8%. The Deutsche X-trackers Harvest CSI 300 China A-Shares Fund ( ASHR) jumped 21.6% and the Market Vectors China ETF ( PEK), which also tracks the A-Share market, rose 22.5%. The H-Share ETFs meanwhile lagged, with the iShares China Large-Cap ETF ( FXI) and the iShares MSCI China ETF ( MCHI) down 1.4% and 3.2% respectively.
        Retail investors in mainland China are getting excited. They opened almost 900,000 broker accounts to track stocks last week, the most since October 2007, according to Bloomberg. Daily trading volume in December more than doubled from November, soaring above 1 trillion yuan a day.
        Fund managers do not want to miss this bull run. According to HSBC, some recently switched out of US into Chinese financials, and some left Russia and Brazil to come to China. Some others, who already have positions in the H-share Chinese brokers and insurance companies, rotated into H-share banks over the last two weeks. The reasoning is simple: while the banks have gained by an average of "only" 12%, the brokers, Citic Securities ( 6030.HK) and Haitong Securities ( 6837.HK) for instance, have soared by over a third.
        Checking the prices, we are seeing the rotation today with banks rising and brokers falling. China Minsheng Bank ( 1988.HK) led the gain with 5.8% jump and China Merchant Bank ( 3968.HK) advanced 3.4%. Meanwhile, Haitong Securities slumped 4.6% and Citic Securities dropped 4.6%.
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        (END) Dow Jones Newswires

        December 17, 2014 00:44 ET (05:44 GMT)

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