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There Won't Be Rapid Growth in Global Demands for Chinese Stocks, Says Expert
John Prasetio, director of the Asia-Pacific Region of renowned international accountants office, Arthur Andersen, said at the just concluded Tianjin Mayor International Consultative Forum that after China's economic restructuring done through readjustment of some policies, China's WTO entry is expected to yield tremendous, long-term economic benefits. However, judged from the capital market situation, after China's accession to the WTO, global needs for Chinese stocks will not increase as fast as it did 10 years ago.
Based on his analysis, he said that currently there are two types of overseas securities investors who show interest in the Chinese securities market. The first type consists of overseas Chinese and regional investors from Asian countries who, compared with investors of international institutions, are more willing to have a try on the Chinese stock market; the other type consists of investors from international institutions scattered mainly in North America, Europe and Japan. They would make evaluation on investing through the aid of modern investment combinations and precautions against risk. The most typical examples are American retirement fund, investment fund, insurance fund and trust fund, they will be the greatest potential investors in China.
However, he noted that essential changes have taken place in the international capital market in the past 20 years. Due to the 1997 Asian financial crisis and debt crisis in Mexico, Russia and Argentina, the combined investment funds of the world have had to approach the newly emerging stock market in a conservative and cautious manner. Worse still, as a result of the drastic slide of the American Nasdaq stock market, the constant appearance of global economic decline and the attack on the United States in September 11, it has become more important to guard against risk. Actually, Western investors have long before ceased casting their eyes on those countries whose legal system for property right protection is incomplete, and whose market transparency and information revelation system remains to be improved.
He said the international stock market has declined this year and the Japanese stock market has been depressed for a long time and has so far shown no sign of a pick-up, and the same situation has faced the overwhelming majority of newly emerging markets in Asia since 1997, all these indicate that after China's entry into the WTO, the demands for Chinese stocks won't increase as fast as it did a decade ago. Out of consideration of their interests, Western investors have entered the stage of taking strict precautions against risk, and this situation would continue for quite a long period of time.
He believes that in the coming 10 years, most American people, namely the "postwar generation", will begin to retire and many more investors who seek a reliable economic source after retirement will emerge from among these elderly. Currently, 60 percent stock right of American companies are being manipulated by specialized investment institutions. This will bring more opportunities for those with long-term, fixed income to invest in the securities market. Once Chinese enterprises acquire a good credit grade, this anticipated growing investment demand will become an important source of funds raised by the Chinese economy globe-wide.
A World Bank report reveals that the amount of foreign investment fund flowing into the Chinese stock market in 2000 totaled US$7.8 billion, presenting a sharp contrast to the US$42 billion of direct foreign investment. But in the corresponding period, the foreign capital flowing into the American stock market hit US$173 billion. These figures show a possibility, said John, when China can provide more investment products, and when its laws, regulations and market operation come in line with the practice of the mature global capital market, China will have the potential to attract capital many times the present amount of investment funds.
By PD Online Staff Yang Ruoqian
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