H SHARES may still be a better bet than blue chips, but the release of disappointing earnings results and the realisation that streamlining operations will take years to boost bottom lines means anyone buying into China is better off acquiring red chips, analysts said.
While liquidity and the 'China syndrome' could reignite the H-share rally before the 15th Party Conference next month, analysts say price gains in these loss-making firms will be short-lived.
'You can still ride the liquidity wave if you have the courage, but judging from history, the bigger the bubble, the sooner it bursts,' Nava SC Securities Hong Kong and China research head Pan Ming said.
In the past month, H shares have surged 27 per cent, while red chips have risen 20 per cent. The blue chip Hang Seng Index, brought down by a wave of selling by overseas funds, has shed 10 per cent.
It is a far cry from last year, when H shares consistently lagged the Hang Seng Index. The turnaround in the flagging shares of these Chinese state-owned enterprises began earlier this moth, with the Hang Seng China Enterprises (H-Share) Index peaking at 1,727.01 points on August 25 - up 62 per cent since the beginning of the year and 35 per cent higher on the week.
Buoyed by a spillover of red-chip fever and rumours other H shares would follow the path of Tsingtao Brewery, Yizheng Chemical Fibre and Shanghai Hai Xing Shipping by restructuring their organisations, investors took H shares to three-year highs.
