Chinese Small Caps Regain Their Footing
China OTC Player submits:Chinese OTC equities have regained their footing this week after a harrowing sell-off that saw our 30-stock index shed 10.3 percent of its value over the last 10 trading sessions of January. While it's never enjoyable to watch one's portfolio take a beating, such volatility comes with the territory of foreign small cap investing. I remain highly bullish on this sector and treated the correction as a buying opportunity, adding to my holdings.Despite the recent drop, Chinese small caps have had a superb year so far, with our index gaining 8.8% since January 1st, far outpacing not only the S&P 500 (-1.6%) and Russell 2000 (-2.4%) indices, but also the large cap heavy Shanghai Composite Index (-8.3%). The fact that small Chinese companies have so dramatically outperformed their large cap counterparts may be largely due to their focus on the booming domestic economy, whereas larger Chinese companies are far more exposed to the dampening effects of the global downturn. Likewise, larger companies have been buffeted by the PRC's fiscal austerity measures, whereas smaller companies, with almost no access to the Chinese capital markets anyway, will feel the effects of tight Chinese monetary policy to a much lesser degree.Complete Story »
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