Chinese stock punting reaches frenzied levels

China may be one of the last countries on the planet to be governed by a Communist Party but with nearly a third of a million domestic brokerage accounts recently being opened on a single day, the appetite of the Chinese for playing their local stock market appears to be insatiable.

However, according to Mark Williams, manager of the top performing F&C Pacific Growth Fund, this frenetic share buying has pushed stock valuations to excessive levels.

"As Chinese domestic investors swarm into their A-share market this has generated stellar returns, particularly from domestic IPOs," explained Williams, "but with ongoing tightening measures almost certainly on the way from China's central bank, stocks do look very vulnerable."

Williams, who remains convinced by the long term Chinese economic growth story, has been positioning his portfolio more defensively ahead of an anticipated correction. For example, during April he sold a long-term position in China Life Insurance following a period of strong performance.

"Having locked in some of the gains made in China I've been seeking new investment opportunities in other Asian markets, such as The Philippines, where companies such as Ayala Corporation, a well established conglomerate, is actually trading at a discount to its net assets," he concluded.