A China Affair
Dora Cheok
AMP Capital's Top Five Holdings
| Rank | Holding | % of Fund |
|---|---|---|
| 1 | China Merchants Bank | 5.2 |
| 2 | Zhejiang Xinan Chemical | 3.9 |
| 3 | China CYTS Tours | 3.8 |
| 4 | Suning Appliance | 3.8 |
| 5 | CITIC Securities | 3.5 |
Wilson says that China's emergence as an economic power is likely to unfold over decades. Hence investors should be looking at this as a long-term holding.
The Affair
Since its listing (list price A$1.02) in September 2006, the fund has largely traded in a 12% wide band. Darryl Guppy says that investors should watch for activity signaled by a sustained breakout above or below this band.
With trends pointing to continued gains on the Shanghai Stock Exchange, Guppy adds that the fund will likely broadly follow the Shanghai index because of its direct exposure to 'A' shares. He feels that the previous high of A$1.45 is an indicative bullish target, at this point of time.
Guppy also highlights the currency advantage for China funds investing in 'A' shares. He sees the yuan moving towards a free float towards the start of 2008. Investors will enjoy a currency benefit if the yuan appreciates against the Australian dollar.
AMP Capital's Wilson encourages investors to reinvest dividends into the Chinese markets as once capital is repatriated out of China it may not be reinvested under the current Qualified Foreign Institutional Investor licensing system.
However, while the future looks rosy for this fund, there are drawbacks to investing in 'A' shares, the main one being that 'A' shares are pricier than their 'H' and/or 'B' share counterparts.
Vincent Kwan, Director and General Manager of HSI Services Limited, points out that Chinese companies that are dual listed and have both 'A' and 'H' shares, have their H shares trading at a 15% - 20% discount. The reason being that with so many Chinese investors -– hence an enormous amount of liquidity in China -– limited to domestic markets, demand has pushed stock prices up.
And that can be good or bad, depending on which side of the fence you're on. AMP Capital's China Growth Fund closed at A$1.14 on Friday.
Please send your questions and comments to us at digital@cnbcasia.com.
