ML S-Shares index - Jan-08

ML S-Shares index update
The objective of the ML S-shares index is to provide exposure to stocks likely to benefit from the growth in China’s economy in general and the money flow into Chinese companies listed on Singapore Exchange (S-shares) in particular.

QDII coming to town
We believe that when QDII fund managers look at S-shares, they will largely focus on S-shares that are reasonably sized and have sufficient trading liquidity.
There are also plans to require all newly launched funds to invest not more than 30% of assets in a single market to ensure proper risk diversification. This would lead new QDII funds to look beyond HK into Singapore as well as US and Europe.
We expect more QDII funds to be launched in the near future, which will further escalate interest in S-shares given their cheaper valuation compared to A-shares and HK-listed Chinese equities. These funds can invest in S-shares either directly or indirectly.
In view of the above, we believe S-shares should continue to be an attractive asset class to investors (including QDII funds) but investment should (and will likely) be in a selective and disciplined manner given the vast quality differences within the sector.


Composition of the ML S-shares index
Name - MarketWeight

COSCO 4.60%
Yangzijiang 4.60%
Yanlord Land Group Ltd 4.60%
China Hongxing Sports 4.60%
Synear Food Holdings 4.60%
China Energy Ltd 4.60%
China Aviation Oil Sing 4.60%
Ferrochina 4.60%
China Fishery Group Ltd 4.60%
Midas 4.60%
Fibrechem 4.60%
China Xlx Fertiliser Ltd 4.60%
China Milk Products 4.60%
Sino-Environment Tech 4.60%
Jiutian Chemical 4.60%
China Auto Electronics 4.60%
Sino Techfibre Limited 3.85%
Celestial Nutrifoods 3.74%
Capitaretail China Trust 3.33%
Asia Environment Hldgs 3.07%
Delong 2.96%
Pine Agritech 2.96%
Bio-Treat 2.27%
China Sport 2.21%
China Sky Chem 2.05%