GUANGZHOU (Fund China) – China Concept cpaital market development trend in the future. A share has ended its pricing power contention as the oversea caiptal surrender the pricing power in half out way. Then Hongkong market will be the main battlefield for both domestic and foreign capital for grabbing the pricing power in the fourth phase of the bullish market. That is first, the A share can not be shorted. Second, the domestic capital, a large number of funds leading by the Southern Fund Management’s QDII fund and including some authorized companies, banks and some other approach capitals has jointed the Hongkong market. The foreign captial, second largest capital flow, has entered the Hongkong market and is ready for the pricing power contesting though it can not enter the market extravagantly.

I am thoroughly impressed with the big gun customer of Wachovia Securities in the American west, 100 million US dollars short sales of China mobile and 100 million short sales of the China Telcom, called it “market CITIC” came to China intentionally from U.S.A and ask whether it is a margin call or a capital transfer. This is a typical case in the domestic and foreign capital pricing power contention. And it is obviously different from the past familiar market.

The emergence of domestic funds in Hong Kong, makes the Hong Kong market the main battlefield for both home and abroad capitals grabbing for the China Market prcing power rights. In A share, it should be no problem in a long trend, but despite the rising expection in 2006 and 2007 is storngly and basically turned down, the 2008 A share market rising expecting is impossible to say but the turbulence will occur more ofte. There are three expections from the market for China capital or A share. First, the stock market would not lower before the The CPC 17th National Congress, senod, it would fall down before the Olympic, third, the bullish market would go on accompanied with the RMB appreciation. The recent wide adjustment in stock market occurred after the first expectaion time. And now for the second period, the stock market will not noly rise as recent as August and then fall down. It has become a psychological game from the fundamentals. Investors should be cautious and optimistic to the A share market.

There are four typical features in the A-share market, which, emerging, restructuring and the Oriental culture are the capital game that beyond the fundamentals. It is still expected that some relative safe or attractive regions can be found in the A share market.

Copyright Fund China 2009.

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