China market up 60% – will this continue?

China stocks: This may spark another round of buying

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A woman holding balloons walks near Oriental Pearl Radio & TV Tower in Shanghai

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A woman holding balloons walks near Oriental Pearl Radio & TV Tower in Shanghai

China shares have surged this year, but with active fund managers still underexposed to the market, the rally isn’t over, Goldman Sachs said.

“Funds of various mandates are underweight the market in a range of 140-600bp, and thus have marked benchmark stress and a need to raise exposure to China,” Goldman said in a note Monday, citing EPFR data. “If emerging market funds alone increase allocations in the largest underweight sectors in China to marketweight, inflows could be worth $26 billion.”

China shares have already rallied strongly, with Hong Kong’s Hang Seng Index up around 21 percent year-to-date to its highest levels since early 2008, while the Shanghai Composite jumped around 39 percent over the same period to its highest since late 2007. Shanghai A-shares price-to-earnings ratio rose to -five-year high of 15.5 times, according to data from Nomura.

Read MoreA Veteran of the Financial Crisis Tells China to Be Wary

But despite the rally making China shares more expensive, pressure for active funds to add more mainland exposure is likely to build as so far this year, those funds have underperformed their benchmarks for their worst performance since 2009, Goldman noted. Only 20 percent of emerging market funds and 40 percent of Asia ex-Japan funds have beaten their benchmark this year, compared with a 60-70 average over the past five years, it said, reiterating its overweight call on China shares.

“Underexposure has directly led to underperformance,” Goldman said, noting that China is now the largest market in both the Asia ex-Japan and emerging market indexes, contributed about half of their year-to-date performance. Almost all Asian markets outside Hong Kong and China have underperformed the MSCI Asia Pacific ex-Japan index and within emerging markets, Russia, China and Hungary are the only three, out of 23, which have outperformed, it noted.

“The opportunity set for active managers has been almost completely limited to the HK/China space, which may intensify the pressure for them to close underweight positions,” it said.

The China market is likely to get another boost as policy makers in Beijing have affirmed a desire to see A-shares included in MSCI global indexes and a willingness to make needed policy changes to adapt to MSCI’s concerns, Goldman said. At the same time, efforts to connect the Hong Kong and Shenzhen stock exchanges and raise the Hong Kong-Shanghai tie-up quota will also help boost China shares, it said.

Read MoreChina cuts bank reserves again to counter slowdown

Others also expect more gains. Despite Hong Kong shares’ sharp rally, more funds are likely to flow out of the mainland and into the market,Credit Suisse said in a note Friday.

“More legitimate capital outflow is likely to be the trend in China,” it said, noting that previously disguised illegal capital outflows will gradually be replaced by more formal ones as the mainland liberalizes its capital account.

In addition, with China’s yuan now expected to depreciate rather than rise, the hurdle rate to make investing in overseas assets is declining, it noted.

There’s another potential source of funds for the China market: its banks.

“Chinese banks, especially the smaller lenders, are forecast to report a boatload of stock market gains in their upcoming first-quarter earnings, judging from central bank data that revealed an unprecedented surge of equities investment by them so far this year,” Reorient Research said in a note Sunday.

Banking institutions put more than 8 trillion yuan ($1.29 trillion) into stocks by end-March, compared with 6.5 trillion yuan in 2014, Reorient said.

“On average, banks have put 600 billion yuan or so into the stock market every month since December, forming a substantial buying force,” Reorient noted.

In addition, “retail investors have also deposited a record amount of cash into their brokerage accounts during March,” with weekly securities trading account openings doubling as some restrictions were removed, it noted.

10 things that will change the world

10 innovations that will change the world

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10 future technologies that will change the world
1. Screenless display
2. Virtual reality
3. Holographic television
4. Wireless electricity
5. Hypersonic trains
6. Neurohacking
7. Invisibility
8. Flying cars
9. 3D printing
10. Autonomous robots – Singularity

Inflation, Inequality, Corruption and Pollution – the top 4 concerns for Chinese Citizens

Environmental Concerns on the Rise in China

Many Also Worried about Inflation, Inequality, Corruption

Survey Report

CHINA20The Chinese public is increasingly concerned about the quality of the country’s air and water after a year in which China experienced numerous high-profile environmental problems.

Meanwhile, even though most Chinese have rated their national economic situation positively in recent years, there are also widespread concerns about the side effects of economic growth, such as rising prices and the gap between rich and poor.

And, more than half (53%) describe political corruption as a very big problem – an issue highlighted most recently by the trial of former Chongqing Communist Party boss Bo Xilai.

As their disposable income grows, many Chinese are worried about the safety and quality of the goods they are consuming. The percentage of Chinese identifying the quality of manufactured goods and the safety of food and medicine as major challenges has risen sharply over the last five years.

Concerns about consumer issues are common across all segments of Chinese society, but they are especially widespread among those who have in many ways benefited the most from the country’s long run of economic expansion – wealthier Chinese, urban residents, and people under age 30.

These are among the key findings from a survey of China conducted by the Pew Research Center between March 4 and April 6, 2013. Face-to-face interviews were conducted among 3,226 respondents.1 Overall, the survey highlights an evolving set of priorities for the Chinese public. As the country’s wealth grows and millions move into the middle class, issues such as the environment and consumer safety are moving to the forefront. At the same time, many believe the country’s economic growth is benefiting some more than others, with the rich and the politically connected reaping more than their share of the rewards.

Widespread Optimism, but Also Growing Worries

The Chinese public has high expectations for the country’s economy. In the short term, 80% said they expect the national economic situation to improve in next 12 months, the highest percentage among 39 countries polled by Pew Research in spring 2013. And in the long run, 82% believe that when Chinese children grow up, they will be better off than their parents – again, the highest percentage registered in the survey.2

CHINA19However, this optimism coexists with a growing set of concerns. Among the 17 issues included in the survey, eleven are considered either a very big or moderately big problem by at least 70% of respondents. Three issues are rated as a very big problem by more than half of those polled.

Inflation tops the list of public concerns. Roughly six-in-ten Chinese (59%) say rising prices are a very big problem, although this is actually down from 72% in 2008.

Meanwhile, inequality is also a major concern, with 52% rating the gap between rich and poor a very big problem. Such unease is little changed from 48% in 2012, but up significantly from 41% in 2008. About seven-in-ten (69%) say the gap between rich and poor has increased in recent years.

Similarly, concerns about political corruption have grown over time – 53% say corrupt officials are a very big problem, up from 39% in 2008.

Just since last year, there have been significant changes in views about the environment. In January, air quality in Beijing and several other major cities reached record lows, and the public is increasingly taking note of this issue. Nearly half (47%) rate air pollution a very big problem, an increase of 11 percentage points from 2012.

And following a year that included headlines about thousands of dead pigs floating down a river through the center of Shanghai, concerns about water pollution have also increased. Four-in-ten say it is a very big problem, compared with 33% last year.

CHINA18Food safety is another issue that has made headlines in recent years, with scandals involving issues such as infant formula and other products. About four-in-ten (38%) consider the safety of food a very big problem, a 26 percentage point increase since 2008. Other consumer issues are also seen by many as major challenges, including the quality of manufactured goods. Roughly three-in-ten (31%) describe this as a very big problem, up from just 13% five years ago. Similarly, 27% hold this view about the safety of medicine, compared with 9% in 2008.

Food safety, the quality of manufactured goods, and the safety of medicine tend to be especially high concerns among 18-29 year-olds, people with higher incomes, and those who live in urban areas.

Lucky to be a girl in China?

China says its gender imbalance

‘most serious’ in the world

(Reuters) – Chinese health authorities on Wednesday described the gender imbalance among newborns as “the most serious and prolonged” in the world, a direct ramification of the country’s strict one-child policy.

The statement will add to growing calls for the government to scrap all family planning restrictions in the world’s most populous nation, which many scholars say faces a demographic crisis.

Like most Asian nations, China has a traditional bias for sons. Many families abort female foetuses and abandon baby girls to ensure their one child is a son, so about 118 boys are born for every 100 girls, against a global average of 103 to 107.

“Our country has the most serious gender imbalance that is most prolonged and affecting the most number of people,” the National Health and Family Planning Commission said in a statement on its website.

The agency said it would step up supervision on foetal sex determination, which is banned in China. It acknowledged that women were transferring blood samples overseas to determine the genders of their babies as part of an “underground chain for profit”.

“This has further exacerbated the gender imbalance in our country’s birth structure,” the agency said.

Researchers have warned that large sex-ratio imbalances could lead to instability as more men remain unmarried, raising the risks of anti-social and violent behaviour.

Many analysts say the one-child policy has shrunk China’s labour pool, hurting economic growth. The working age population fell again in 2013, the government said on Wednesday.

In late 2013, China said it would ease family planning restrictions to allow millions of families to have two children in the most significant liberalisation of the one-child policy in decades.

Critics say the relaxation of rules was too little, and came too late to redress substantial negative effects on the economy and society. Analysts say China faces the prospect of becoming the first country in the world to get old before it gets rich.

State media said earlier this month that a year after China eased its one-child policy, fewer people than expected have applied for permission to have a second child.

Beijing Pollution – going East, going West, essentially going everywhere

China’s choking air pollution goes west: Greenpeace

Residents cover their face from dust as they ride their bicycles along a street on a hazy day in Zhengzhou

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Residents cover their face from dust as they ride their bicycles along a street on a hazy day in Zhengzhou, …

BEIJING (Reuters) – China’s choking air pollution is moving to the country’s west, environmental group Greenpeace said, though air quality may have modestly improved in eastern cities such as Beijing in recent months.

Provinces in central and western China, including Henan, Hubei, Hunan and Sichuan, are now among those with the worst PM2.5 levels in the country, a measure referring to particles smaller than 2.5 micrometres in diameter that are hazardous to health, Greenpeace said on Tuesday.

Facing mounting public pressure, leaders in Beijing have declared a war on pollution, vowing to abandon a decades-old growth-at-all-costs economic model that has spoiled much of China’s water, skies and soil.

But efforts to curb smog in China’s eastern urban hubs have pushed many industrial polluters west.

“Armed with this information, the government must now ensure that pollution is not simply relocated to other regions, and that the same strict measures enacted in cities like Beijing are actually enforced across the country,” Zhang Kai, Climate and Energy Campaigner at Greenpeace East Asia, said in a statement on the group’s website.

The analysis was based on data provided by the Chinese government for the first quarter of 2015.

China has sought to improve transparency and compel polluters to provide comprehensive and real-time emissions data, but doubts have arisen in the past about the accuracy of Chinese air pollution indices.

China’s vice minister for environmental protection in early April announced a two-year inspection campaign to root out fake air quality data and accused some local governments of manipulating the information to meet national standards.

The Greenpeace analysis said Beijing still ranked in the top five worst polluted provincial-level regions in China, though the capital’s PM2.5 concentration improved more than 13 percent in the first quarter of this year compared to the first quarter of 2014.

Over the past seven years, PM2.5 levels in Beijing averaged nearly five times the recommended daily level set by the World Health Organization, according to data from a monitoring station at the U.S. embassy.

(Reporting by Michael Martina; Editing by Nick Macfie)

Is Cross-Border E-commerce in Southeast Asia’s future?

Is Cross-Border E-commerce in Southeast Asia’s future?

The ebay Inc. website is displayed for a photograph in Tiskilwa, Illinois, on Jan. 20. Daniel Acker/Bloomberg NewsJAKARTA, Indonesia—Growth of interconnected e-commerce across Southeast Asia could help improve the flow of goods in the region, create jobs and stimulate the economies of individual countries, say industry analysts.And with Internet penetration still low, there is plenty of opportunity for expansion.But to increase the e-commerce segment in the Association of Southeast Asian Nations (Asean), and eventually create a region-wide digital economy, both governments and businesses will need to address barriers to things such as online payments, lack of trust in online purchasing and logistical challenges that slow deliveries, both analysts and officials said at a panel during the World Economic Forum on East Asia.Other major economies have moved to building an interconnected e-commerce sector, said Aldi Harypratomo, co-founder of Ruma Indonesia, an organization that supports small-businesses in Indonesia by helping solving e-payment issues.“We can’t let Asean stay behind because we can’t figure out e-payment,” he said.Indonesia’s Minister of Information and Communications, Rudiantara, said a lack of infrastructure needed to provide speedy deliveries, and warehousing capabilities, drives up costs for e-commerce companies.

For example, e-commerce companies must ensure that the items they export are cleared by customs and ready to be shipped as soon as possible. The longer an item sits at customs, the greater chance it has of becoming unused inventory, since consumers will turn to turn physical retail shops rather than wait.Mr. Rudiantara said Indonesia is preparing rules that would support the integration of e-commerce with other sectors, such as transportation, logistics services, finance and payment gateways in an effort to solve the problem.By allowing these sectors to work together, the government can better tap into the huge potential offered by the cross-border sale of goods online, Mr. Rudiantara said.The coming of a region-wide Asean economic community by the end of 2015 could help since it’s meant to allow for the free flow of people, goods and services within the 10-member grouping.One of the AEC’s objectives is to create a seamless customs process, in part by removing tariffs and easing trade barriers.But the market in Southeast Asia also needs to build trust, sophistication and work to better educate consumers before e-commerce can really take off, said Yobie Benjamin, co-founder of Michigan-based Avegant Corporation, a virtual display manufacturer.Aside from Singapore, e-commerce services in the region are being used as “research vehicles,” to know how much a product costs, for example, he said. After consumers figure that out, “they will drive to the store to purchase it or meet somebody who sells it and pay with cash.”