At the beginning of the year, the H-shares were flying high. Now they're eating dirt:
It was all going so well for Chinese stocks in Hong Kong. Just seven months ago, the Hang Seng China Enterprises Index was surging to the highest levels since 2008 and strategists couldn’t raise their targets quick enough. Now, the gauge of so-called H shares is tumbling at the fastest pace among global peers, analysts are downgrading their forecasts and valuations have dropped to levels approaching those of Zambia.With most of the H shares being dominated by (state-owned) financial concerns, the hope was that lower rates and cross-border opening would benefit these shares:
Even by the volatile standards of emerging markets, it’s a dramatic fall from grace for stocks that bulls had expected to surge as China cut interest rates, opened up cross-border capital flows and revamped state-owned companies. Investors have instead been driven away by weak economic growth and an anti-graft campaign that led to the disappearance or arrest of some of China’s most high-profile corporate executives. "I was fooled," said Hao Hong, the chief China strategist at Bocom International Holdings Co. in Hong Kong. "Cheap is not enough."They are turning into something of a joke if you consider their "peers," crisis-hit Zambia and Laos with stocks that can be counted on one hand:
Selling by investors, meanwhile, has dragged down the H-share index by 37 percent from this year’s high in May, the steepest drop among equity gauges in the world’s 50 biggest markets. It now trades at 6.9 times earnings, lower than every benchmark index apart from Zambia, the southern African country facing a economic crisis, and Laos, which only has four listed equities. The Hang Seng China gauge is valued at the biggest discount versus the MSCI All-Country World Index since 2003, according to data compiled by Bloomberg.The interesting though is that mainland stock markets like that in Shanghai have not fared as badly, but that's a story for another day.