Global Investing

On the rocky road to change in China

One thing investors in China thought they could rely on was a steady, if unelected, hand.

Now Chongqing’s political head Bo Xilai has fallen, and in pretty spectacular fashion too. His wife has been accused of murdering a British businessman and his brother had to step down from the board of Everbright Bank. There are rumours the handover of power in the Politburo scheduled for this autumn, when seven out of nine of Chinese leaders are going to retire, could be delayed as the intrigue unfolds.

So what does this mean for investing in the Middle Kingdom? Xi Jinping is tipped for the top, and presuming he makes it to the transition unscathed, one of his tasks will be continuing the internationalisation of the renminbi. 

Xi has something of a reputation as a reformer, but that doesn’t necessarily mean he’ll let China’s currency float freely.

John Adams, director of HR China and former manager for China at the Bank of England, said this about Xi at a talk in London this week:

Bad Corp is better than Zqjrlbawzx Corp

Got a company to set up? Better go for a simpler name.

That is what psychologists at Princeton University found in a  survey when they studied data from two major U.S. stock exchanges on initial public offerings.

They found that people are more likely to purchase newly offered stocks that have easily pronounced names than those that do not. After the IPO, investing $1,000 in companies that have easy-to-pronounce names generated $333 more than investing in the 10 hardest to pronounce companies.

In one case, an initial investment of $1,000 yielded a profit of $112 more after one day of trading for a basket of fluently named shares than for a basket of “disfluently” named shares.