Geraci at Beijing Financial Summit cools down enthusiasm

Geraci attended China Financial Summit 2017 conference, today in Beijing. In his speech, he said Foreign investors are a little reluctant to invest in the Chinese market especially A-Shares for many reasons. Geraci also believes that Chinese interest rates are not high enough to compensate for risk. Moreover, he thinks it is more difficult for China to export its infrastructure model to foreign countries because foreign governments have no control over infrastructure development.

The benefits of “unclear’ regulations in the Chinese funds market

China’s securities regulators are gathering comments about the proposed regulations to govern the fund raising procedures for private funds, traditionally used as a vehicle to transfer money into the shadow banking” system. The new regulations that will be drafted after receiving all comments will cover all types of private funds, including investments in securities and equity, as well as venture capital. Individuals and firms whose leverage ratios exceed 50% are also restricted in the industry. I actually believe there are often-overlooked benefits that are the results of regulations not being too clear.

Morgan Stanley positive on A-Shares. But…

Morgan Stanley said in a report that the likelihood of a new bull run in China’s A-share market has increased as the country is believed to be capable of managing its debt problem and avoiding financial shocks. The bullish sentiment was based on its positive views about China’s ability to rebalance its economy. I think actually rebalancing is not happening fast enough in China. When a central bank lowers interest rate, the investment tends to go up. So the goal of rebalancing the economy cannot be achieved with the loose monetary policy.