There’s a silver lining to this year’s $2.5 trillion bloodbath in China’s equity market: foreigners want in.
Buying yuan-denominated shares has rarely been so easy and inexpensive for international investors, according to Bloomberg. The currency is near its weakest in 16 months and hedging against further declines is very cheap. Valuations are 16 per cent lower than when MSCI first added the shares to its indexes only two months ago, while restrictions to access have eased, daily quotas have increased and trading mechanisms have come through testing.
Mainland stocks barely feature in international portfolios, a shortfall that China’s been trying to address for years as it gradually opens its economy. Recent northbound buying shows overseas traders are hunting for value in China after the CSI 300 Index lost as much as 32 per cent in dollar terms since January. That’s increased their ownership of the mainland market to about 5.3 per cent of free float from 2 per cent earlier in the year, according to asset management firm Robeco.
“It’s given the long-term buyers a much better entry point,” said Victoria Mio, the chief China investment officer for Robeco’s Hong Kong unit. “They weren’t caught in the weakness and can afford to be a little less cautious than in January, when everything was expensive. People who were going to enter the market anyway might as well do it now.”
Foreign investors bought a net $3.7 billion of mainland shares since July 25, according to data compiled by Bloomberg based on daily quota usage. MSCI last week listed 10 more A shares it plans to add to its indexes at the end of the month, a change that will lift the weighting of mainland stocks to 0.75 per cent of its emerging-market gauge. While the proportion is still tiny, it’s another step toward attracting some of the $2tn tracking MSCI’s indexes worldwide.
Rival index provider FTSE Russell is slated to announce plans for A shares in September.
There are signs China wants to improve access for foreigners, a move that would broaden the pool of money available to support its languishing stock market. Regulators last week said they’ll ease some trading restrictions facing overseas qualified investors such as insurers, pension funds or sovereign-wealth funds. The announcement triggered a temporary rally in onshore stocks.
Fresh declines in stocks and the yuan mean the valuation case for Chinese shares is stronger than it’s been all year. A gauge of large caps, a group that comprises the majority of foreign buying, trades at only 8.4 times projected earnings, down from a multiple of 12 times in January. Relative to the S&P 500, it’s near the biggest discount in about 15 months.
“Everything has a price,” said Charles Feng, head of macro trading at Standard Chartered in Hong Kong. “At a certain point, people are going to come in and start to pick the bottom. That’s why I wouldn’t be that bearish on everything.”
Luring foreigners comes at a crucial time for China’s equity market as the country’s 142 million day traders, who drive more than 80 per cent of daily turnover, grow increasingly disheartened. But with better known companies in Hong Kong or New York also trading cheap, not all investors see the need to plunge into A shares.
“There’s value everywhere in the China space,” said Andrew Mattock, who helps manage Matthews Asia’s China funds from San Francisco. While he’s been buying H shares after the sell-off, he says he hasn’t increased A-share exposure. “There’s extreme value in Hong Kong and even expensive ADRs are getting interesting.”
Robeco’s Mio, who earlier this year travelled throughout the US, Europe, Australia, and Latin America to pitch A shares to foreign investors, said many refrained from buying because they had only just started researching China’s $5.9tn equity market. CLSA’s Alexious Lee agreed, noting there are about 3,600 companies trading on China’s main boards in Shanghai and Shenzhen. That’s more than those listed in London or Hong Kong.
“Overseas investors need time to understand the market, get to know the companies and be confident enough to position themselves beyond the top 15 stocks,” said Mr Lee, head of China capital access at CLSA. “Now is a great moment to do that.”
While foreign investors survey the scene in the world's second-biggest economy, China revealed it almost quadrupled the value of fixed-asset investment projects approved in July as Beijing looks to accelerate infrastructure spending to boost the cooling economy.
China gave the green light to 17 fixed-asset investment projects in July, worth a combined 77.69bn yuan (Dh41.27bn), Zhao Chenxin, an official at the National Development and Reform Commision (NDRC), said this month.
That compared with approvals for 20.8bn yuan of spending in June, Reuters calculated from official data.
Beijing is accelerating infrastructure spending and rolling out other support measures for businesses to cushion the economy as it braces for the impact of escalating US trade tariffs. Data last week showed China's investment growth has slowed to a record low and consumers are turning cautious on spending.
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Abu Dhabi Investment Office signs co-operation agreement with China council
China’s economic and diplomatic footprint in the Gulf region will expand as its investments grow
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The NDRC also said that 1.73tn yuan worth of debt-to-equity swap agreements had been signed as of end-July, although only 352bn yuan has been transacted.
Beijing has encouraged highly indebted firms to enter into such agreements as part of its sweeping, multi-year campaign to reduce risks in the financial system and a mountain of debt.
But some China watchers are now questioning whether the stream of new stimulus measures and easier credit has put Beijing's debt reduction efforts on the back burner again.
Under debt-to-equity swap schemes, investors get equity stakes in firms and in exchange the firms are able to lower their debt burden, though the specifics of each deal are different and often complex.
When asked by Reuters if the deleveraging campaign has hurt the economy, as suggested by the weak July data, NDRC official Chen Hongwan said the twin goals of sustainable economic growth and debt reduction were not mutually exclusive.
"We can't just simply say deleveraging is at odds with economic growth," he said, adding that moves such as forcing "zombie" firms to close were good for the economy and healthier companies in the long run.
However, many deeply troubled companies are state owned with many employees, raising the risk of layoffs.
While announcements of big projects are starting to come thick and fast, analysts caution they have long lead times and they may not begin to arrest the decline in China's economic growth until next year.
"The key headwinds were the same as before – slowing investment (especially infrastructure) and an ongoing unwind of shadow credit due to deleveraging measures," analysts from UBS Chin awrote in a recent note, referring to a crackdown on riskier lending which is shutting down an important source of funds for small, private companies.
Despite the eye-catching road and rail spending, economists at Nomura believe Beijing is so far proceeding more cautiously with stimulus than in past downturns.
The government is most likely saving its policy ammunition for September and the fourth quarter, after more sweeping US tariffs take effect, Nomura said in a note this week.
Company Profile
Name: JustClean
Based: Kuwait with offices in other GCC countries
Launch year: 2016
Number of employees: 130
Sector: online laundry service
Funding: $12.9m from Kuwait-based Faith Capital Holding
Saturday's results
Brighton 1-1 Leicester City
Everton 1-0 Cardiff City
Manchester United 0-0 Crystal Palace
Watford 0-3 Liverpool
West Ham United 0-4 Manchester City
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
On racial profiling at airports
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
Fuel consumption, combined: 10.5L / 100km
The specs: 2018 Chevrolet Trailblazer
Price, base / as tested Dh99,000 / Dh132,000
Engine 3.6L V6
Transmission: Six-speed automatic
Power 275hp @ 6,000rpm
Torque 350Nm @ 3,700rpm
Fuel economy combined 12.2L / 100km
MATCH INFO
Iceland 0 England 1 (Sterling pen 90 1)
Man of the match Kari Arnason (Iceland)
Coming 2 America
Directed by: Craig Brewer
Starring: Eddie Murphy, Arsenio Hall, Jermaine Fowler, Leslie Jones
3/5 stars
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
Sunday's games
All times UAE:
Tottenham Hotspur v Crystal Palace, 4pm
Manchester City v Arsenal, 6.15pm
Everton v Watford, 8.30pm
Chelsea v Manchester United, 8.30pm
LOVE%20AGAIN
%3Cp%3EDirector%3A%20Jim%20Strouse%3C%2Fp%3E%0A%3Cp%3EStars%3A%20Priyanka%20Chopra%20Jonas%2C%20Sam%20Heughan%2C%20Celine%20Dion%3C%2Fp%3E%0A%3Cp%3ERating%3A%202%2F5%3C%2Fp%3E%0A
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
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THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
If you go...
Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.
Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50
Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
RESULTS
%3Cp%3E%3Cstrong%3E5pm%3C%2Fstrong%3E%20Al%20Shamkha%20%E2%80%93%20Maiden%20(PA)%20Dh80%2C000%20(Turf)%201%2C400m%3Cbr%3E%3Cstrong%3EWinner%3C%2Fstrong%3E%20Ruwani%2C%20Moatasem%20Al%20Balushi%20(jockey)%2C%20Abdallah%20Al%20Hammadi%20(trainer)%3Cbr%3E%3Cstrong%3E5.30pm%3C%2Fstrong%3E%3A%20Khalifa%20City%20%E2%80%93%20Handicap%20(PA)%20Dh80%2C000%20(T)%201%2C400m%3Cbr%3E%3Cstrong%3EWinner%20%3C%2Fstrong%3EAF%20Heraqle%2C%20Bernardo%20Pinheiro%2C%20Qaiss%20Aboud%3Cbr%3E%3Cstrong%3E6pm%3C%2Fstrong%3E%20Masdar%20City%20%E2%80%93%20Handicap%20(PA)%20Dh80%2C000%20(T)%201%2C600m%3Cbr%3E%3Cstrong%3EWinner%3C%2Fstrong%3E%20AF%20Yatwy%2C%20Patrick%20Cosgrave%2C%20Nisren%20Mahgoub%3Cbr%3E%3Cstrong%3E6.30pm%3C%2Fstrong%3E%20Wathba%20Stallions%20Cup%20%E2%80%93%20Handicap%20(PA)%20Dh70%2C000%20(T)%202%2C200m%3Cbr%3E%3Cstrong%3EWinner%3C%2Fstrong%3E%20AF%20Alzahi%2C%20Tadhg%20O%E2%80%99Shea%2C%20Ernst%20Oertel%3Cbr%3E%3Cstrong%3E7pm%3C%2Fstrong%3E%20Emirates%20Championship%20%E2%80%93%20Group%201%20(PA)%20Dh1%2C000%2C000%20(T)%202%2C200m%3Cbr%3E%3Cstrong%3EWinner%3C%2Fstrong%3E%20Ajrad%20Athbah%2C%20Bernardo%20Pinheiro%2C%20Majed%20Al%20Jahouri%3Cbr%3E%3Cstrong%3E7.30pm%3C%2Fstrong%3E%20Shakbout%20City%20%E2%80%93%20Handicap%20(TB)%20Dh80%2C000%20(T)%202%2C400m%3Cbr%3E%3Cstrong%3EWinner%3C%2Fstrong%3E%20Webinar%2C%20Tadhg%20O%E2%80%99Shea%2C%20Bhupat%20Seemar%3C%2Fp%3E%0A
KEY DEVELOPMENTS IN MARITIME DISPUTE
2000: Israel withdraws from Lebanon after nearly 30 years without an officially demarcated border. The UN establishes the Blue Line to act as the frontier.
2007: Lebanon and Cyprus define their respective exclusive economic zones to facilitate oil and gas exploration. Israel uses this to define its EEZ with Cyprus
2011: Lebanon disputes Israeli-proposed line and submits documents to UN showing different EEZ. Cyprus offers to mediate without much progress.
2018: Lebanon signs first offshore oil and gas licencing deal with consortium of France’s Total, Italy’s Eni and Russia’s Novatek.
2018-2019: US seeks to mediate between Israel and Lebanon to prevent clashes over oil and gas resources.
UAE currency: the story behind the money in your pockets
PREMIER LEAGUE FIXTURES
Saturday (UAE kick-off times)
Watford v Leicester City (3.30pm)
Brighton v Arsenal (6pm)
West Ham v Wolves (8.30pm)
Bournemouth v Crystal Palace (10.45pm)
Sunday
Newcastle United v Sheffield United (5pm)
Aston Villa v Chelsea (7.15pm)
Everton v Liverpool (10pm)
Monday
Manchester City v Burnley (11pm)
PROFILE OF INVYGO
Started: 2018
Founders: Eslam Hussein and Pulkit Ganjoo
Based: Dubai
Sector: Transport
Size: 9 employees
Investment: $1,275,000
Investors: Class 5 Global, Equitrust, Gulf Islamic Investments, Kairos K50 and William Zeqiri
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Another way to earn air miles
In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.
An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.
“If you use your HSBC credit card when shopping at our partners, you are able to earn Air Miles twice which will mean you can get that flight reward faster and for less spend,” says Paul Lacey, the managing director for Europe, Middle East and India for Aimia, which owns and operates Air Miles Middle East.
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
Killing of Qassem Suleimani
Sri Lanka Test squad:
Dimuth Karunaratne (stand-in captain), Niroshan Dickwella (vice captain), Lahiru Thirimanne, Kaushal Silva, Kusal Mendis, Kusal Janith Perera, Milinda Siriwardana, Dhananjaya de Silva, Oshada Fernando, Angelo Perera, Suranga Lakmal, Kasun Rajitha, Vishwa Fernando, Chamika Karunaratne, Mohamed Shiraz, Lakshan Sandakan and Lasith Embuldeniya.
ABU%20DHABI'S%20KEY%20TOURISM%20GOALS%3A%20BY%20THE%20NUMBERS
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'How To Build A Boat'
Jonathan Gornall, Simon & Schuster
Sri Lanka v England
First Test, at Galle
England won by 211
Second Test, at Kandy
England won by 57 runs
Third Test, at Colombo
From Nov 23-27
Courses%20at%20Istituto%20Marangoni%2C%20Dubai
%3Cp%3E%3Cstrong%3EUndergraduate%20courses%3C%2Fstrong%3E%3Cbr%3EInterior%20Design%3B%20Product%20Design%3B%20Visual%20Design%3B%20Fashion%20Design%20%26amp%3B%20Accessories%3B%20Fashion%20Styling%20%26amp%3B%20Creative%20Direction%3B%20Fashion%20Business%3B%20Foundation%20in%20Fashion%3B%20Foundation%20in%20Design%3Cbr%3E%3Cstrong%3EProfessional%20courses%3C%2Fstrong%3E%3Cbr%3EFashion%20e-Commerce%20%26amp%3B%20Digital%20Marketing%3B%20Fashion%20Entrepreneurship%3B%20Fashion%20Luxury%20Retail%20and%20Visual%20Merchandising%3Cbr%3E%3Cstrong%3EShort%20courses%3C%2Fstrong%3E%3Cbr%3EFashion%20design%3B%20Fashion%20Image%20%26amp%3B%20Styling%3B%20Fashion%20Trend%20Forecasting%3B%20Interior%20Design%3B%20Digital%20Art%20in%20Fashion%3Cbr%3EMore%20information%20is%20at%20%3Ca%20href%3D%22https%3A%2F%2Fwww.istitutomarangoni.com%2Fen%3Futm_source%3DLocal%26utm_medium%3Dorganic%26utm_campaign%3Dgmb%26utm_content%3Ddubai%22%20target%3D%22_self%22%3Ewww.istitutomarangoni.com%3C%2Fa%3E%3C%2Fp%3E%0A
Genesis G80 2020 5.0-litre Royal Specs
Engine: 5-litre V8
Gearbox: eight-speed automatic
Power: 420hp
Torque: 505Nm
Fuel economy, combined: 12.4L/100km
Price: Dh260,500
