Hong Kong Adds To Mainland Stocks To Its Reserves
Hong Kong's Central Bank is the latest institutional investor to get “China Fever”, with the city's Monetary Authority adding mainland Chinese stock and bonds to its exchange reserves fund. In November, Hong Kong joined other central banks and sovereign wealth funds by being granted Qualified Foreign Institutional Investor status. QFII status allows investors to make limited investments in China and purchase China's A-shares. Hong Kong's central bank was granted permission to buy up to $300 million in direct investments in mainland China.
For investors, Hong Kong's decision to enter the Chinese marketplace helps strengthen China's appeal as an investment destination. Recently, there has been some concerns regarding the health of the Chinese economy, the long term thesis is good. Using the recent weakness, investors may want to add China to a portfolio.
To follow in Hong Kong's QFII steps, investors can add either the Morgan Stanley China A Share Fund (NYSE: CAF) or Market Vectors China ETF (NYSE: PEK), which both bet on Chinese A shares. However, PEK uses swaps to achieve that effect and there is some counterparty risk. Hong Kong is available via the iShares MSCI Hong Kong Index (NYSE: EWH) and IQ Hong Kong Small Cap ETF (NYSE: HKK). The nation is already a leading financial powerhouse in Asia and could see continued gains as it takes strategic investments throughout mainland China.
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