Aberdeen, Blackrock flag risks in frothy Chinese stock markets

Tue Apr 21, 2015 5:59am EDT
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By Saeed Azhar and Anshuman Daga

SINGAPORE (Reuters) - Aberdeen Asset Management's head of Asian operations warned on Tuesday that Chinese money was moving "a bit like a casino" in domestic stock markets, while BlackRock called on China to reform its capital markets further to avert boom and bust scenarios.

China stocks .SSEC have jumped nearly 80 percent since November to trade near seven-year highs. On Monday, Shanghai Stock Exchange trade surpassed 1 trillion yuan ($161 billion) for the first time, making the bourse the world's biggest in terms of turnover ahead of the New York Stock Exchange.

Recent strong gains have come despite stretched valuations, prompting a warning from the official Xinhua news agency late on Monday against "irrational exuberance".

Aberdeen's managing director for Asia, Hugh Young, said he was worried about some speculative activity in the Chinese stock market.

"Chinese money is moving a bit like a casino and it's moving offshore. Within the domestic Chinese market, the levels of turnover are tremendous," he told Reuters on the sidelines of a Credit Suisse conference in Singapore.

His comments came after Larry Fink, CEO of BlackRock, the world's biggest money manager, said his firm believes China needed more robust capital markets.

"And by having a more robust capital market, it will mean we'll have less boom bust. Right now, we are experiencing typical boom bust. Let's hope it doesn't end poorly."

Fink added China should expand its capital markets, and needs more IPOs and better underwriting standards.   Continued...

An investor looks back in front of computer screens showing stock information at a brokerage house in Wuhan, Hubei province April 20, 2015. REUTERS/Stringer