Investors show renewed interest in Chinese securities

A variety of sources have projected only modest earnings growth in securities markets for the third quarter. Of the six major sector groups measured by the S&P 500, just over half were expected to have growth in earnings. What a surprise, then, that the Dow recorded a 0.9 percent closing high yesterday. The S&P 500 also exceeded its 2007 benchmark of intraday trading yesterday.

Analysts can’t pinpoint the exact reasons for the market surge. Some speculate that cautious investors have finally tired of waiting. One of the more interesting investment trends appears to be in Chinese securities, with trade figures in March reflecting a 10 percent increase from the previous year.

An investment opportunity is clearly present in China, for the simple reason that it is the world’s fastest-growing economy. In addition, many Asian companies are borrowing at rates that are very low. To date, American investors have purchased a net $163.53 million in Asian bonds, excluding Japan. As investors become more comfortable investing in Chinese debt, they may be tempted to consider buying riskier securities, lured by the potential for higher yields.

However, the fiduciary duty imposed on fund managers applies to all types of investments, including Chinese securities. A securities fraud attorney might remind readers that there are ample reasons to approach Chinese investments cautiously. For example, stockbrokers or brokerage firms might not be in a position to recommend international investments because they lack local knowledge of the companies. Additional governmental or bureaucratic restrictions imposed by Chinese officials may add to the lack of transparency.

An investor that chooses to invest in Chinese or other international securities has a right to rely on the material representations made by a stockbroker or brokerage firm. To the extent any misrepresentations, omission, or incorrect information is provided about the risks associated with such securities, a wronged investor might have reason to hold those professionals or firms responsible by bringing a securities fraud lawsuit.

Source: online.wsj.com, “The U.S. Is Back in Asian Debt,” Fiona Law, April 9, 2013