What To Do With Your Best China

I’ve long been a proponent of the economic engine that is China, but Chris Perruna raised an interesting point.  The Chinese market is now almost a mirror image of the NASDAQ from the early 2000’s.  Scary.

China’s main stock indexes posted further record highs on Monday after the exchanges had been closed for a week due to National Day Holidays. The CSI 300 Index, which tracks largest listed companies on China’s two exchanges, rose 1.3% surpassing the previous record close on September 28.

Real estate companies and financials were among the best performers. Vanke, China’s largest publicly traded developer, jumped by the 10% daily limit on speculation that a rising Chinese yuan will lure more foreign investors into the piping-hot Chinese real estate market. Shares of large domestic banks also jumped sharply, realizing similar gains to their Hong Kong listed counter-parts.

Despite record breaking indexes, more than half of listed companies saw their market cap decline.

Analysts are arguing that the Chinese market has become increasingly dominated by large cap companies. Indeed, more than 50% of the Chinese market is now made up of the top 30 listed companies.

The trend is expected to continue as the government encourages overseaslisted industry leaders to return to the domestic market. For example, Hong Kong traded Shenhua Energy just finished its US$8.9 billion mainland IPO, the country’s largest equity financing.

With more blue chips trading in China, the quality of the market will improve, providing a little bit of comfort to China bulls, some of whom are feeling nervous about the record-setting market.

What do you plan on doing with your Chinese investments? 

Do you have an exit plan? 

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