TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
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As international investors get new access to the mainland market, its indifference to global events is partly why its equities are so attractive
Bloomberg
18 November 2014
For investors fed up trying to predict how the global economy will influence day-to-day moves in equities, the mainland’s US$4.2 trillion stock market is the antidote.
The Shanghai Composite Index’s indifference to the United States Federal Reserve’s prognostications, Japan’s monetary expansion and fluctuations in global growth is a reason to buy, says Bank Julius Baer.
The correlation between the Shanghai gauge and the MSCI All-Country World Index is 0.1, the lowest among major equity markets.
“It is the market of the second-largest economy in the world, and it dances to a domestic China agenda,” said Jim O’Neill, the former Goldman Sachs economist who coined the BRIC moniker in 2001 to highlight the rising economic power of Brazil, Russia, India and China. “If you are investing in different things, you want them to be less correlated.”
Global investors got a new conduit to China’s idiosyncrasies yesterday with the debut of the Shanghai-Hong Kong exchange link, which allows a net 23.5 billion yuan (HK$29.7 billion) of daily cross-border purchases and is one of the mainland’s most significant steps in opening its capital markets.
Individual investors are the price setters in Shanghai and their propensity for technology, consumer and smaller firms has driven up valuations on those stocks, Goldman Sachs says.
Buyers need to watch momentum more carefully than in other markets, BlackRock says.
“Chinese retail investors are less sensitive to US and European factors,” said Kelvin Wong, a Hong Kong-based analyst at Bank Julius Baer. “They mainly focus on the domestic market or sectors that arouse their interest.”
The 120-day correlation of 0.1 between Shanghai’s index and the MSCI global gauge compares with 0.3 for Hong Kong’s Hang Seng Index, 0.8 for the Stoxx Europe 600 Index and 0.9 for the Standard & Poor’s 500 Index.
A level of 1 suggests shares move in lockstep, while zero signals there is no relationship.
Because of the restrictions on foreign investment on the mainland, Chinese stocks are not eligible for MSCI indices.
The Shanghai Composite rose 3 per cent between September 3 and October 16 as the MSCI All-Country World Index fell 9.4 per cent amid concern about the Fed ending its bond-buying programme and the risk of another European recession.
The Shanghai benchmark remains 59 per cent below a 2007 peak, while US shares are posting record highs.
“At various points in the cycle, having low correlation may be a positive or negative,” said Helen Zhu, BlackRock’s head of China equities. “One thing for sure, though, is that having access to an asset class with particularly low correlation can be a useful tool in diversification of risk.”
Investors in Shanghai shares tended to be more momentum and catalyst-driven and less concerned with valuations, Zhu said.
Until yesterday, overseas investors were bound by a more restrictive quota system to buy mainland shares. They needed a qualified foreign institutional investor or a renminbi qualified foreign institutional investor licence. They also had to submit an application to the State Administration of Foreign Exchange for a specific US dollar amount of investment quota to spend on stocks.
The equity link bypasses these rules, allowing foreigners to buy Shanghai shares through their Hong Kong brokers. Eligible mainland companies include those on the SSE 180 and SSE 380 indices, as well as dual-listed shares.
Mainland institutions and investors with at least 500,000 yuan in their securities accounts are now able to buy stocks on the Hang Seng Composite Large Cap and Hang Seng Composite Mid Cap indices, also a relaxation of previous restrictions.
Wong said he favoured investing in Shanghai consumer and health-care companies that did not have Hong Kong listings as well as large-cap stocks at low valuations.
Companies on the SSE 180 trade at 9.4 times estimated earnings, compared with a multiple of 17 on the S&P 500.
Investors who think they know how to pick H shares will make a mistake if they apply the same strategy to mainland equities, according to Goldman Sachs.