Jeff Tjornehoj on "Business for Breakfast" 1060 KRCN Tuesday, November 28, 2006 - China Funds
Q: Good morning, Jeff. Although the year isn't over, it appears ChinaRegion Funds will end up as the best performing fund category this year.A: That's right. With a year-to-date gain of 47%, it's pretty far ahead ofthe next top performers, Real Estate and Emerging Markets, which are bothup 34%.
Q: Do you think those kinds of numbers will get a lot of investors'attention?
A: Certainly some people are going to "discover" China and that worries me,since China's stock market has been one of feast or famine for manyyears--it's tended to skyrocket for one year, disappoint for two or threeyears, then have another huge year followed by a string of losses. The pastfew years have broken that cycle--it returned 8%-9% from 2004 to 2005--but Ihave my doubts for 2007.
Q: Why is that?
A: I'm definitely not an expert on Chinese stocks, but the news I keep upwith is drawing more attention to accounting problems. Sometimes it's afirm with simple bookkeeping issues; sometimes it's government officialssiphoning off pension money. So far, investors have shrugged off most theseallegations, but given how small the Chinese stock market is, at some pointthey could really shake people's confidence.
Q: So, there's a bit of a Wild West atmosphere out east?
A: Far more so than we're accustomed to around here. Between cozygovernment and business relations and a devil-may-care attitude to keepingproper accounts, China still has a long way to go before foreign investorstruly have a good idea of what they're getting.
Q: Right--we have a thing called "generally accepted accounting principles"to help us.
A: Yes we do. Although exchanges in Singapore and Hong Kong are doing theirbest to keep their Chinese listings on the straight and narrow, it's a lotto police.
Q: I'm sure it is. Thanks for joining us this morning.
A: My pleasure.
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