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Foreigners rush to ride China rebound, but analysts warn of risks

Published on Nov 26, 2012 4:36 PM
An investor sits in front of an electronic board displaying stock market information and a screen showing Chinese President Hu Jintao delivering a speech during the opening ceremony of the 18th National Congress of the Communist Party of China, at a brokerage house in Taiyuan, Shanxi province on Nov 8, 2012. -- PHOTO: REUTERS

HONG KONG (REUTERS) - Foreign investors have started rebuilding their China equity portfolios, tempted by low valuations after two years of market underperformance and signs that economic growth may be stabilising.

They have pumped nearly US$4 billion (S$4.9 billion) into Chinese equity funds in the past two months alone, trying to get in early on what they hope will be a sustained rally.

But sentiment looks to be running ahead of fundamentals.

There are clear risk signals for the Chinese market - including sluggish earnings, rising corporate debt and retail investors looking for other opportunities - even if the broader economy gathers strength.

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