One On One With Jing Ulrich, Chairman of Chinese Equities at J.P. Morgan
Wednesday, June 21, 2006
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SUSIE GHARIB: While it was a good day on Wall Street today, it`s been a great year for the Chinese stock market. The Shanghai composite index has risen 45 percent in the past 12 months, one of the best-performing markets in the world. Our guest tonight says there are many investment opportunities for American investors in China. Joining us now, Jing Ulrich, chairman of Chinese equities at J.P. Morgan. Jing, welcome to NIGHTLY BUSINESS REPORT.
JING ULRICH, CHAIRMAN, CHINESE EQUITIES AT JP MORGAN: Thank you for having me.
GHARIB: I know you`ve been talking to American investors all week in New York. Tell us, what is your pitch as to why investors should invest in Chinese stocks?
ULRICH: Well, you know, Susie, Chinese stocks are probably one of the most compelling investment stories of our time. As you know, China is thefourth-largest economy in the world and it is the third-largest trading nation. In the last 20 years, the economy has been growing at 8 to 10 percent per year. And, of course, a capital market has been developing rapidly. In China, there are 1,400 listed companies now. In addition, you have several hundred listed in Hong Kong so there`s plenty of investment opportunities for investors to choose from.
GHARIB: Now the Chinese stock market, like many international stock markets, sold off in the last month. It was down 3.7 percent. What`s the outlook from here? What kind of return can American investors expect?
ULRICH: Well, the Shanghai exchange has actually been the best- performing stock market in the whole world year to date. China does have defensive characteristics. We`re expecting earnings growth to range between 10 to 15 percent this year, therefore a 10 to 15 percent return on the stock market is entirely reasonable.
KANGAS: OK. Can you hear me?
ULRICH: Yes.
KANGAS: OK. I just would like to know what industries over there are the most attractive to American investors. We lost our audio with Susie.
ULRICH: There are several attractive investment areas. One of them is a consumer sector. There are 400 million consumers in China who are classified as middle-class. In addition to that, we have infrastructure. China`s still building a lot of railways, ports and highways. Plus the financial services sector, especially insurance companies.
KANGAS: There`s been some concern by American investors about the accounting rules in China and whether they`re anywhere near what we have over here. Do you feel that they`re adequate?
ULRICH: Well, corporate governance, transparency and accounting standards have been improving in China over the last few years, but, of course, there`s still a gap between the Chinese standards and international standards. But I would say as China`s market becomes more globalized and transparencies and accounting standards are definitely improving, but we still have some ways to go.
KANGAS: How do Americans invest? How convenient is it for an American investor to buy into the Chinese market?
ULRICH: Well, U.S. investors here can purchase mutual funds. They can always purchase closed end funds which are listed on the New York Stock Exchange, plus there are several dozen ADRs listed here in New York aswell.
KANGAS: OK. And do you feel that the potential for the Chinese market is one of the best potentials of any markets in the world?
ULRICH: Well, in the longer term I do believe so. It is one of the most attractive markets. But I do advise investors that they need to take a short term, tactical view because right now the central government in China is tightening monetary policy, so in the short term, the outlook should be a relatively cautious one. But in the medium to long term, that`s a long-term strategic view, I do believe the outlook for the market remains very sound.
KANGAS: That was very enlightening, Jing. We appreciate your being with us.
ULRICH: Thank you for having me.
KANGAS: We`ve been speaking with Jing Ulrich, chairman of Chinese equities at JPMorgan.
