China’s Stocks Look ‘Oversold,’ Morgan Stanley Says

Chinese yuan-denominated stocks, heading for their worst week in 16 months, will probably rebound after plunging below counterparts listed in Hong Kong, according to Morgan Stanley’s Jerry Lou.

“The market looks very, very oversold,” Lou, Morgan Stanley’s China strategist, said in a Bloomberg Television interview in Singapore. The discount for stocks in Shanghai relative to Hong Kong “is really, really rare,” he said.

Yuan shares traded in Shanghai and Shenzhen and restricted almost exclusively to local investors on June 18 fell below stocks traded in Hong Kong for the first time in almost four years, according to the Hang Seng China AH Premium Index. When this happened in November 2006, China’s benchmark index tripled in 12 months, outpacing a 156 percent gain in Hong Kong’s gauge and a 58 percent rise in the MSCI Emerging Markets Index.

Read Full Article from BusinessWeek

- Posted: 2010-07-01 22:55:27

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