The final aim of this thesis is to evaluate opportunities and risk factors of investing in China, in terms of pros and cons, and also to elaborate an optimal portfolio strategy. The pros regarding investments in China are (1) the economic liberalisation and reforms of the institutional framework; (2) the Chinese market’s huge potential and the high-growth IT and telecommunications sectors; (3) a favourable macroeconomic climate and an impressive development. The cons are (1) the mismanagement of the state-run companies; (2) the mainland exchanges’ intra-year volatility; (3) the export sector’s performance might decline; (4) the institutional framework is largely responsible for many risk factors; (5) a tougher competition climate after the entry in the WTO. Also, our calculations on an optimal portfolio strategy suggest that less risk-averse investors may want to consider the World/Shanghai portfolio, whereas the World/Shenzhen portfolio might instead suit the preferences of more risk-averse investors.
Contents
1. INTRODUCTION
1.1 EMERGING MARKETS AND CHINA
1.2 AIM OF THE THESIS
1.3 DELIMITATION
1.4 CENTRAL CONCEPTIONS
1.5 METHOD
1.6 CRITICISM OF OUR SOURCES
1.7 DISPOSITION OF THE THESIS
1.8 LEGAL DISCLAIMER
2. FRAME OF REFERENCES
2.1 EMERGING MARKETS
2.2 MACROECONOMICS AND THE STOCK MARKET
2.2.1 Macroeconomic Forecasting
2.3 PORTFOLIO RISK AND RETURN
2.3.1 Definition of Risk
2.3.2 Risk Propensity
2.3.3 Measuring Portfolio Risk and Return
2.4 PORTFOLIO THEORY
2.4.1 Diversification Strategy
2.4.2 Top-Down versus Bottom-Up Approach
2.4.3 Sharpe Index
2.4.4 Technique for Calculating the Efficient Frontier
3. CHINESE POLITICS AND ECONOMY
3.1 AN INTRODUCTION TO CHINESE POLITICS
3.1.1 Political and Institutional Risks
3.2 ECONOMIC PERFORMANCE
3.3 TRADE AND TRADE AGREEMENTS
4. THE CHINESE STOCK MARKET
4.1 COMPARATIVE MARKET STATISTICS
4.2 DIFFERENCES BETWEEN THE HONG KONG AND MAINLAND STOCK EXCHANGES
4.3 SHAREHOLDING SYSTEM AND COMPLICATIONS
4.4 FINANCIAL POLICY AND INSTITUTIONAL REFORM
4.4.1 Banking Sector Reform Dilemma
4.4.2 Financial Sector Reform
4.5 INDUSTRIES AND TRENDS IN THE CHINESE MARKET
4.5.1 The IT Industry
4.5.2 The Telecommunications Industry
5. CHINA EQUITY FUNDS
5.1 ARAGON SKAPA AKTIEFOND KINA
5.2 SKANDIALINK MULTI-LINK CHINA MAINLAND, CHINA SECURITIES
5.3 FF-FLEMING CHINA FUND
5.4 INVESCO GT GREATER CHINA OPPORTUNITIES FUND (A)
5.5 INVESCO GT PRC FUND (C)
6. ANALYSIS
6.1 QUALITATIVE ANALYSIS
6.1.1 Opportunities and Risks: Economic, Political and Institutional
6.1.2 Macroeconomics and the Stock Market
6.1.3 Industry Sectors
6.2 QUANTITATIVE ANALYSIS
6.2.1 Estimating the Efficient Frontier
7. CONCLUSION
Author: Stark, Jens,Wiklund, Fredrik
Source: Linkoping University
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