April 5, 2007
Flavia of the Month
I read this article about Flavia Cheong, manager of the $700 million China Opportunities Fund. (Do her friends call her Flavor Flav?) Anyway she’s a typically risk-averse Singaporean and her fund’s two-year performance puts her 51 out of 53. Doesn’t matter, she gets paid an obscene amount of money (no doubt) whether she performs or not — that’s the beauty of the mutual fund business.
This bit annoyed me:
“Investors from around the globe poured $22.4 billion into emerging-market mutual funds in 2006 and half of that — $11.2 billion — went into China funds…. That helped buoy the Shanghai Composite Index 130% last year.”
Wrong! I’d bet next to none of that money went into domestically-listed shares. What’s buoying the Shanghai Composite are a bunch of manicurists, day trading grannies, and other folks who pick stocks with “lucky” names.
April 5th, 2007 at 1:50 pm
Where does the money for the funds go then?
Is that where the locals are investing their USD savings then? Lucky Tiger 888 company.
April 5th, 2007 at 3:00 pm
Andrew: It goes into overseas-listed stuff (mainly Hong Kong H Shares and Red Chips) and maybe a bit into the super-illiquid B Share market in China, but next to none goes into A Shares — that reporter clearly doesn’t know much about the Chinese markets.
Locals with greenbacks would love to invest them abroad but have few outlets and face serious foreign exchange restrictions.
April 5th, 2007 at 9:25 pm
Can a local in China go to his or her bank and buy as many dollars as they want?
April 5th, 2007 at 10:44 pm
I agree with your view. Chairman.
April 5th, 2007 at 11:07 pm
jp: No, there are very strict rules and quotas concerning the conversion of RMB.
April 6th, 2007 at 3:08 am
Chairman, don’t you agree with Flavor Flav on avoiding the mainland stock for its obscene valuation?
Her comment about a mainland company vice Chairman boasting 100% profit margin was probably true. What do you think?
JP: The RMB to dollar conversion quota is $50,000 per year per person if I remember correctly.
April 6th, 2007 at 8:55 am
werdna: I agree with Flav that prices are generally too high (not sure about “obscene”), and yes, there’s a lot of incompetent or ignorant management about (but there are also some very sharp cookies).
April 7th, 2007 at 4:11 pm
Hi Chairman
Your comment is true, but so is hers. Her comment is quote broad and general.
If money goes into H-shares and pushes up their prices, this will naturally have some level of impact as some of them are dual listed.
Obviously you are right in the sense that it will not have a significant impact…