STOCK MARKET WATCH -- Wednesday, 15 August 2012

[Demeter]

18. China’s Bear Market Lures Foreign Bids as Locals Pull Funds

FOOLS RUSH IN...

http://www.bloomberg.com/news/2012-08-14/china-bear-market-lures-record-foreign-bids-as-locals-pull-funds.html

International money managers are lining up to buy stocks in mainland China at a record pace, even as a third year of equity losses spurs local investors to empty trading accounts like never before.

While overseas firms were granted $6.9 billion of quotas to purchase mainland securities since December, more than in any full year since the government program began, the number of Chinese stock accounts containing funds dropped by 788,000 to 56.3 million in the year to Aug. 3, the most for a 12-month period. A record 110 million are empty or frozen, according to regulatory data compiled by Bloomberg.

Foreign funds from Taiwan Life Insurance Co. to Shinhan BNP Paribas Asset Management Co. say the 54 percent discount for companies in the Shanghai Composite Index to their 10-year average, and the lowest valuations relative to MSCI Inc.’s developing-nations measure make China shares irresistible. Local individuals, companies and institutions, which hold about 99 percent of mainland shares, are turning more bearish as the world’s second-largest economy slows.

“The value story is clearly emerging in China,” Kim Jun Sung, the chief investment officer for equities at Samsung Asset Management Co., which oversees about $100 billion and received a $150 million quota to buy mainland securities in 2010, said in an Aug. 7 interview in Seoul. “The economic outlook continues to be negative so the catalyst for growth is not yet there.”

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