PETALING JAYA: China’s huge domestic stock market, which has grown to become the second largest in the world, presents an attractive opportunity for investors, said Value Partners Ltd.
The stock market, which is still largely unexplored by foreign investors, has become “far too big to ignore”, said Value Partners co-chairman and co-chief investment officer Datuk Seri Cheah Cheng Hye.
Speaking at the Malaysia-China Outlook Forum 2019 here, Cheah said the level of foreign ownership of stocks in the Chinese domestic stock market, also known as “China A-shares”, is only at 3.5%.
A-shares refer to stocks of China-based companies listed on its domestic stock exchanges – the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
Cheah said the level of foreign ownership of these stocks is expected to rise rapidly to between 15% and 20% in the next 10 to 15 years.
“There will be a rush of buying, which has actually already started,” he told reporters after a presentation on the topic.
The catalyst for this rush, he said, was the move by major global indices such as the MSCI and FTSE Russel to include China A-shares in their indices in recent times.
“This has resulted in fund managers all over the world putting Chinese stocks on their radar,” he said.
China’s domestic stock market, which has some 3,700 listed companies, is the second largest in the world, and the largest in Asia in terms of trading volume.
His favourite sectors to invest in, among the A-shares, are within China’s new economy, and include fast-growing areas such as healthcare, education, travel and the IT sector.
This, he said, was as China’s old economy, which includes the heavy industries, steel and automotive sector, were already mature and not growing rapidly anymore.
On how Malaysian investors can tap into the China stock market, Cheah said they could do this via the Hong Kong stock exchange.
“Hong Kong is the only place in the world, at the moment, which has a unique arrangement whereby investors can place orders for China A-shares through Hong Kong’s brokers.
“Malaysians can identify Malaysian brokers who have partnership arrangements with Hong Kong brokers,” he said.
On China’s growing population, Cheah said while investors frequently spoke about the global supply-chain, he preferred to look at the country in terms of its demand.
“China has 400 million domestic consumers and continues to grow fast,” he said.
The huge and growing domestic market, he said, presented a massive opportunity to Malaysian businesses who could market their products and services.
“This is a market closing in on the US market in terms of size and wealth.
“We must to pay attention to it, find out what products and services they need, and strive to be the ones to supply them,” he said.