ASIAN and European investors are snatching up discounted Chinese stocks hit by a U.S. investment ban, finding bargains as giant American funds bail out and shrugging off concerns that the sanctions could hurt the companies’ prospects. Swiss investment bank UBS said clients were interested in taking advantage of the selldown. In a week that saw Vanguard and BlackRock announce divestments, cash has poured in to lift Hong Kong-listed shares of Chinese telecom carriers by more than 15 percent. China Mobile saw its best week in nearly 12 years last week. Oil company CNOOC Ltd.’s Hong Kong-listed shares were up 14 percent and chipmaker SMIC 11. All three are subject to the sanctions and have been, or risk being, removed from global indexes. The flows and price moves point to deep faith abroad and especially at home in the worth of the 35 Chinese mainland companies, and subsidiaries, which Americans are barred from holding after November 2021. It also raises questions over how painful the sanctions will prove. “I think it’s worth monitoring the market closely these days because there will be forced liquidations triggered,” said UBS’ head of China strategy Wendy Liu. “We do have European investors interested in stocks blacklisted by the United States.” U.S. funds are scrambling to sell following a November order from U.S. President Donald Trump banning buying companies deemed to have links with China’s military. He clarified Wednesday that the ban extends to owning the stocks. Passive investors are also responding to the removal of more than a dozen companies from benchmarks compiled by MSCI, FTSE Russell and S&P Dow Jones Indices. Vanguard and BlackRock have given few details of their divestments and have not detailed exactly which stocks they have sold. Vanguard has said it has sold to comply with the rules and BlackRock said its index funds have responded to index changes. “Opportunity exists now,” said portfolio manager Dave Wang at Singapore’s Nuvest Capital, which has increased exposure to State-owned firms in the construction and energy sectors in China since the U.S. sanctions were announced. “Profit outlook is trending upwards, while valuation has been depressed and lots of pessimism is priced in due to the U.S. list.” (SD-Agencies) |