uploads///Performance of China focused Mutual Funds

SSE Composite Index Was Almost Flat Due to Growing Uncertainty


May. 31 2016, Published 11:28 a.m. ET

SSE Composite Index was almost flat last week

The SSE (Shanghai Stock Exchange) Composite Index was almost flat for the week ending May 27, 2016. It ended at 2,821.05 on May 22. Investors were cautious about a probable rate hike in the US.

Equity markets are also falling amid growing uncertainty about China’s monetary policies and economic health. The People’s Bank of China’s policy team published a report on May 26. The report said, “It’s objective and appropriate to keep China’s monetary policy generally prudent with slight loosening.” The report also stated that “China’s economic growth remains within a reasonable range, but the economy faces relatively big downward pressure.”

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The SSE Composite Index includes all of the listed stocks (A-shares and B-shares) at the Shanghai and Shenzhen stock exchanges. A-shares are shares denominated in the domestic currency—the renminbi. They’re only available to local investors. B-shares are denominated in a foreign currency such as in the US dollar on the SSE and in Hong Kong dollars on the Shenzhen Stock Exchange. They’re available to foreign investors.

Tight trade suspension rules

The two main stock exchanges in China, the SSE and the Shenzhen tightened the rules on voluntary trading suspensions. According to notices posted on their websites, “share suspensions of listed companies involved in major asset restructuring cannot exceed three months, and companies conducting private placements cannot be suspended for more than one month.”

The guidelines issued by the Shenzhen Stock Exchange said, “Companies that want to apply for trading suspension longer than three months should hold a board meeting to decide the arrangement. Professional opinion is required from sponsors and financial advisories if the company apply for long term trading suspension.”

The trading suspension restriction comes ahead of June 15 when MSCI will decide whether it will include Mainland Chinese stocks in its emerging market index. It’s tracked by about $1.5 trillion in assets all over the world.

Return of China-focused funds

For the week ending May 27, the John Hancock Greater China Opportunities Fund – Class A (JCOAX) was the best performer. It rose 5.4%.
Meanwhile, the Columbia Greater China Fund – Class A (NGCAX), the Clough China Fund – Class A (CHNAX), the Fidelity Advisor China Region Fund – Class A (FHKAX), and the Neuberger Berman Greater China Equity Fund – Class A (NCEAX) rose by 4.3%, 3.2%, 2.6%, and 1.5%, respectively.

For the same period, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) and the iShares MSCI China ETF (MCHI) rose by 0.1% and 3.8%, respectively.

American depositary receipts of Chinese companies such as 58.com (WUBA), Baidu (BIDU), and NetEase (NTES) rose by 10.4%, 8.8%, and 5.8%, respectively, for the week ending May 27.

In the next part, we’ll discuss why Mark Yusko and Mark Mobius are bullish on China.


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