Some See Good Buys in China Firms in Wake of Weakness

U.S. investors say China’s fallen stock prices are encouraging them to jump into the country’s equity markets.

“Would I begin buying now? Yes,” said Michael Holland, a partner at the Blackstone Group and a director of the publicly traded China Fund.

The Credit Lyonnais index of Chinese stocks traded in Hong Kong fell 15% this year while the index of “B” shares, which are listed in China and can be traded by foreigners, has declined a sharp 37.6%.

Prices of Chinese stocks traded on the New York Stock Exchange have also dropped. Minibus manufacturer Brilliance China Automotive’s stock has fallen 55% in the year.

But Holland said inflation, concerns about the future of China after senior leader Deng Xiaoping dies, and accusations that some state companies have not honored debts are already reflected in the prices of Chinese equities.

Brilliance, for example, is trading at about a third of its price-earnings ratio of two years ago.

And Holland also sees increasing profits as the continued freeing of China’s economy improves productivity.

Other investors said that while the short-term investor may not want to tamper with Chinese equities right now, long-term potential is still a plus.

“In the long-run, I think they’ll have an economic explosion there. It’s gonna be huge,” said Joe Glossberg, senior managing director of Chicago-based money managers, Gofen & Glossberg.

Gofen & Glossberg owns 155,000 shares in the China Fund, and is buying more, he said.

But China’s market could remain volatile, said some investors. They prefer to invest in China indirectly by buying Hong Kong or Southeast Asia companies with business in China.