Other Ways to Try to Cash In on China Boom
Small investors looking to bet on China’s growth potential needn’t limit themselves to the country’s fledgling stock issues. Other ways to invest in China:
* Hong Kong stocks. The Hong Kong market’s Hang Seng stock index has ridden a rocket for two years, rising from 2,700 in October, 1990, to 6,471 earlier this month. The catalyst has been global investors’ belief that Hong Kong firms will continue to be prime beneficiaries of China’s future growth.
But last week, Hong Kong stocks tumbled as Britain and China renewed their bickering over details of the return of the colony to China in 1997. The Hang Seng index closed Friday at 5,878.18, a loss of 488 points, or 7.7%, for the week.
Liza Vera, an emerging-markets analyst at Bear, Stearns & Co., argues that Western investors should “ignore the rhetoric in Hong Kong-China disputes, and pay attention to the substance” of dramatic economic reform in China, which she views as irreversibly positive for Hong Kong companies.
At current prices, the Hong Kong market remains one of the cheapest in the world, trading for about 11 times estimated 1993 earnings, Vera says. Some of her favorite Hong Kong stocks, easily purchasable through U.S. brokers, include Hong Kong & China Gas, conglomerate CITIC Pacific and chicken processor C. P. Pokphand.
* Mutual funds. There are 22 open-end, U.S.-based mutual funds that target Asian stocks, and many focus heavily on Hong Kong issues.
The latter include Equi-Wright Hong Kong (phone: 800-888-9471), Newport Tiger (800-527-9500) and T. Rowe Price Intl. Asia (800-638-5660). All naturally plummeted in price last week when the Hong Kong market plunged.
Also, two closed-end funds were created this year to target Chinese stocks specifically, though the funds will probably take a long time to get invested, given that so few stocks are available.
The China Fund went public at $15 a share in July and now trades at $14.375 on the New York Stock Exchange. The Greater China Fund, also a $15 new issue in July, closed at $13.125 on the NYSE Friday.
* U.S.-traded Chinese stocks. There’s only one so far, Brilliance China, an auto-parts maker. It went public at $16 on Oct. 9 and closed at $28.875 on the NYSE Friday. Expect more over time.
