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Four types of companies listed on China's A-Share market will be popular with overseas institutional investors, including those having an industry monopoly, such as over airports, harbors and expressways, said a leading investment bank.
In its research report on China's A-Share market disclosed in mid-March, UBS Warburg singled out preferential choices of shares on that market, which has a capital value of 500 billion US dollars.
UBS Warburg was one of the first group of applicants for QFII (Qualified Foreign Institutional Investor) status, and is still awaiting approval from Chinese regulators, including the central People's Bank of China, the China Securities Regulatory Commission and the State Administration of Foreign Exchange.
According to the report, the other three types of companies were those "with Chinese characteristics", for example, alcohol producers and cheap-labor textile enterprises, companies that own valuable self-developed brands, and companies engaged in resources development like coal mines and iron mines.
"We hope to get overseas investors who are interested in Chinese stocks into the A-Share market as soon as possible," said Yuan Shuqin, the manager in charge of Warburg's QFII application.
Yuan's bank offered a variety of funds for clients who could bean indirect China market investor through purchasing shares of one or more these funds.
The bank is planning to employ three more staff to conduct A-Share research exclusively and to give ratings on A-Share companies, according to Yuan.
Deutsche Bank had announced a 50 million US dollars fund earmarked for A-Share business in anticipation of obtaining a QFII license.
Based on the German bank's survey and analyses of over 1,200 listed companies on the A-Share market, some 40 to 50 were of investment value, according to Zhang Lihong, general manager of the bank's China operations.
Despite most Hong Kong and Taiwan-based dealers being out of reach of QFII status because of the huge capital required, they were still major authors of research reports on the A-Share market thanks to their close relations with the stock markets on the mainland.
"We know exact detailed information about domestic industries and the flux of overseas direct investment, and we have kept long-term business relations with would-be A-Share investors abroad," a Hong Kong analyst said.
The Taiwan-based CSC International Holdings Ltd. said it began research on A shares in the second half of 2000, and has since compiled each year the report on China industries in the English language and investment guide books in Chinese.
Economists said the China A-Share "fever" was a result of China's economic success amid a shaky global economy. Especially under the impact of the Iraq war, China achieves stability and sustained economic growth.
Qiu Yanying, a researcher with the leading Huaxia Securities Institute on the mainland, said the QFII is the best chance for vast overseas institutional investors to get involved in the A-Share market, and this "fever" will become even more intense as QFII becomes operational.
(Xinhua News Agency April 2, 2003)
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