Foreign companies that have poured billions of dollars into Chinese stocks are not looking to bail out, despite a decision by two major U.S. firms to cash in and realize huge profits from their investments.
In a double whammy late on Wednesday, aluminum giant Alcoa Inc said it had sold its stake in Chinese peer Aluminum Corp of China (Chalco) for US$2 billion and U.S. investor Warren Buffett's Berkshire Hathaway Inc said it had sold a $136 million tranche of top Chinese oil producer PetroChina Inc
But market participants put the sell-offs down to individual circumstances and said other foreign firms with big China stakes, such as banks and insurers, were in for the long haul.
None of those banks would dream in their wildest dreams of selling. Those are difficult stakes to come by, said Sunil Garg, a banking analyst at JP Morgan in Hong Kong.
An exit is something that's going to blacklist them forever. This is ultimately the global prize in global banking.
Foreign banks with big exposure to China include Bank of America Corp, which has 8.5 percent in China Construction Bank, one of China's four big state lenders, and Royal Bank of Scotland a partner of Bank of China
I don't think anybody has even remotely reached the point where they think their hopes aren't going to be realized, Garg said, referring to the banks.
Alcoa and Buffett's sales fly in the face of roaring demand for Chinese equities among mainland investors, who are prepared to buy shares in the restricted Shanghai market at premiums of 50 percent or more to the price of the same shares in Hong Kong.
Until such time as we address the capital flow issue with regards to domestic investors, then these valuations may persist because you've got a captive audience who have nowhere else to go except in China and to a lesser extent eventually in Hong Kong, said Anthony Muh, executive director at AllianceTrust Asset Management.
One China strategist at a leading bank said the real signal to sell China would not come from disappointed strategic investors, of which Alcoa was just the latest example, but from closer to home.
The bigger danger comes from the Hong Kong tycoons -- they are really financial investors, said the strategist, who asked not to be identified.
Henderson Land Chairman Lee Shau Kee and Hutchison Whampoa Chairman Li Ka-shing, among others, are big holders of mainland Chinese companies, often buying into initial public offerings as so-called cornerstone investors.
By contrast, the moves by Alcoa and Buffett were taken with a pinch of salt.
It's not got anything to do with the wider market. As China's market gets more global you're going to see more of this kind of thing, said Binay Chandgothia, chief investment officer at Principal Asset Management in Hong Kong.
Until you know the wider story you don't know what's behind it. It's premature to generalize on one or two factors.
Although Chalco shares fell 8.5 percent in Hong Kong and PetroChina dipped 0.4 percent, the wider index of Chinese stocks listed in Hong Kong was flat.
The share prices of these companies went up so much that profit-taking is quite normal, said Linus Yip, equity strategist at First Shanghai Securities Ltd.
In Buffett's case, his firm still holds 9.72 percent of PetroChina's freely tradeable shares, despite trimming its stake twice in as many months. And Alcoa was taking $2 billion in cash to leave a Chinese venture that had failed to spark into life.
HSBC analyst Daniel Kang said in a note that the key motive for Alcoa's selldown was the overvaluation of Chalco, but the shifting balance of power in the global aluminum sector might also have tempted it to move into cash.
While its intentions were not disclosed, we believe that if Alcoa's ultimately failed bid for (Canadian aluminum producer) Alcan ... was driven by a defensive motive, then the company may pursue potential acquisition targets, Kang wrote.
(Additional reporting by Ian Chua)