Date
18 December 2017
Philipp Bärtschi of J. Safra Sarasin says European investors are wary about the outlook for the Chinese market. Photo: EJ Insight
Philipp Bärtschi of J. Safra Sarasin says European investors are wary about the outlook for the Chinese market. Photo: EJ Insight

Europeans lukewarm to cross-border stock trading

European investors are showing tepid interest in A shares as cross-border stock trading draws closer, a Swiss private banker said.

“Some brokers have been passing along the information, but generally, investors are not very enthusiastic about emerging market stocks at this point,” said Philipp Bärtschi, managing director and chief investment officer for private clients of J. Safra Sarasin.

He said European investors are deterred by the fact that emerging market stocks have been underperforming since 2010.

The opening of Hong Kong-Shanghai Stock Connect, as the trading scheme is called, is an important development for foreign investors who want more access to the mainland market, he said.

However, a lot of investors are still cautious about the outlook for Chinese stocks.

“There are just more interesting places like the US market to invest in,” he said.

“At this stage, it is very hard to attract investors to invest [in A shares] immediately but I think there will be more positive developments over the medium term.”

Bärtschi said a further opening of the mainland equity market will lead to more transparency and information for foreign investors that will eventually produce more inflows into Chinese stocks.

The trading scheme, which begins on Nov. 17, allows stock investors from Hong Kong and overseas to trade up to a daily limit of 3 billion yuan (US$2.12 billion) worth of Shanghai stocks, or 300 billion yuan in total.

At the same time, mainland investors can trade up to a daily limit of 10.5 billion yuan worth of Hong Kong shares or 250 billion yuan altogether.

Bärtschi said he expects the Chinese government to continue to use targeted measures to rebalance the economy from investment and property-driven growth to a more consumption-based model.

It is most likely to invest in infrastructure such as roads, railways and airports to boost productivity in the long term, he said.

Chinese corporates and banks will see increased refinancing needs over the next few years after ramping up credit.

The central bank will be careful to avoid any disruption in liquidity while not injecting too much cash into the market, he said.

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JH/JP/RA

EJ Insight reporter

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