“The market will continue to rise, the upward trend is still quite clear,” Chen Huiqin, of Huatai Securities in Wuhan, explained to the FT on Friday. “There is just too much money in the market, especially in the hands of the fund managers, who have no choice but to keep buying stocks and building up their positions.”
Hmm. Reckless hands, we suspect.
On Thursday, Bank of China fessed up to holding just under $10bn in US subprime paper and CDOs. While its ‘H’ shares fell more than 6 per cent in Hong Kong in response, the reaction of investors in Shanghai was to push the price of the ‘A’shares up 1.3 per cent.
The gap between Bank of China’s mainland and HK prices has been widening for nine months now. This week the average premium of A shares over H generally widened to 70 per cent for the first time - and that is in response to Monday’s news that China intends to let its residents buy overseas stock (such as H shares)!
