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The globalization of financial markets with the advent in information technology has made it easier for foreign investors to invest into overseas markets. There are two important markets in Asia: Hong Kong and Japan, where international investors have an easy access to Asian stocks through ETFs (Exchange Traded Funds), mutual funds or through direct ownership of ADRs (American Depository Receipts). There are also a number of Asian companies trading on the exchanges in the US and Europe either through ADRs, GDRs or through direct listing. Furthermore there is a second tier of Asian equity markets including Thailand (NYSE:TTF), Indonesia (AMEX:IF) and Malaysia (AMEX:EWM), all of which offer access to their equity markets through ETFs.
There are currently a large number of stocks, 4 indexes and over 30 mutual funds that trade or track the performance of Chinese stocks in the US alone. The most notable companies trading on the New York Stock Exchange are China Life Insurance (LFC), China Telecom (NYSE:CHA), PetroChina Co (NYSE: PTR), and China Southern Airlines (NYSE: ZNH), these stocks are classified as N shares. Hong Kong has a separate section on their Exchange that lists the 180 largest Mainland China companies through H shares.
With the liberalizationand further development of Chinese financial markets and revaluation of the Yuan, there should be an increased demand for certain Chinese stocks, particularly those in service, telecom, banking, utilities and construction sectors. These sectors are most likely to benefit from Yuan appreciation as more investors gain an easier access to Chinese markets. In case of other Asian markets such as Hong Kong and Japan, they may face a rebalancing as some investors will liquidate their holdings and reallocate their investments to mainland China. But given the location of Hong Kong and its significance as being a gateway into China and a |
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major trade center in South East Asia, the amount of investments will increase overtime. However Yuan revaluation is not necessarily positive for all sectors of the Chinese economy. Exports of low cost products that are based on
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 cheap labor could be threatened. Consequently, the ongoing search for cheap labor will set its sights on China's developing labor-abundant neighbors such as India, Thailand, Indonesia and Malaysia. As a result, China could be forced to move towards more high-tech capital-intensive products. With Chinese manufacturers leaving the low-end market, it provides the perfect opportunity for other low cost manufacturers in countries such as India, Thailand, Malaysia, Indonesia, and even Vietnam to pick up where China left off. This could be very beneficial for the stock markets in those countries. |
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