Foreign buyers look to ride out latest China share troubles

Wed Jan 6, 2016 1:35pm EST
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By Marc Jones and Sujata Rao

LONDON (Reuters) - Foreigners holding Chinese shares appear largely unworried by the latest dive on domestic markets, with some even looking to pick up bargains if the removal of an emergency stock sale ban unleashes a bigger plunge.

The six-month ban on sales by listed companies' major shareholders, imposed during the height of a rout last summer , is due expire on Jan. 8. But following this week's fresh bout of brutal volatility, reports on Wednesday suggested it will be extended.

The uncertainty highlights the tricky nature of the authorities' task in stabilizing the market.

Three trading sessions into 2016, Shanghai-listed shares .SSEC .CSI300 have lost $240 billion of their value after a peak-to-trough drop last year of around 45 percent.

Whenever the selling ban is eventually relaxed, it will unlock up to 1.24 trillion yuan ($190 billion) worth of shares, flooding the Chinese bourses with yet more supply.

Many investors hope Beijing will spread the process out but Citi analysts estimate that if the ban is lifted abruptly, this could create 100 billion yuan a month in selling pressure for a while afterwards.

With Beijing's intentions so difficult to judge, most investors accept that they must keep calm and carry on. "We try not to focus on the share overhang issue," said Nicholas Yeo, head of Chinese equities at Aberdeen Asset Management. He has made very few changes to his portfolios of China A-shares, which are listed on mainland markets dominated by local investors.

Yeo said the uncertainty can suit the Chinese authorities. "It is all very opaque. There is an advantage in keeping the market guessing. It could even be that they are giving instructions already to the big investors." he added.   Continued...

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