Tuesday, August 30, 2011

China's rich prefer homes over stocks - Shaun Rein

Poor accounting standards in China make Chinese investors very weary of stocks in any Chinese company, business analyst Shaun Rein discovered in his research. In CNBC he explains why they prefer real estate, even though the government tries to cool down the industry.
As we sat in his enormous living room, Zhou continued to tell me why he preferred to buy homes rather than put money into the stock market, "There are no annual property taxes, so I just buy homes and leave them empty to resell at some point. At the end of the day, if things go wrong, you still have tangible assets if you buy property." Many Chinese investors hold similar views: they deem real estate as the safest investment in a country ravaged by accounting fraud. After all, even famed investors like billionaire John Paulson lost USD 340 million according to Fortune Magazineinvesting in companies hit by accounting scandals like Sino-Forest. Zhou`s investment strategies indicate the Chinese real estate sector is being driven as much by a belief in the sector as a fear of other sectors. Zhou explained why he shies from stocks, "Chinese stocks are political plays as much as business ones. State-owned oil giants Petrochina or Sinopec might do poorly because the government forces them to cap prices. Or Baidu,  Netease or Sina might get hit by Internet regulation campaigns. You need to analyze political winds as well as business ones.  It is simpler to buy homes.
More in CNBC Shaun Rein is a speaker in the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.
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