By Goh Eng Yeow, Markets Correspondent

SHARES of China companies listed in Singapore have been left out in the cold, while those in Shanghai have been enjoying a spectacular rally.

Yesterday's market activity illustrated the two-track performance.

While the Shanghai bourse rose 0.8 per cent after two days of sell-off, Singapore's FTSE ST China Index fell a further 1.9 per cent.

That marked an almost uninterrupted fortnight of losses, punctuated by only two days of gain.

It has largely been like this all year. Not even repeated 'buy' calls from local brokerages pointing out that the shares are at bargain-basement levels can ignite interest among investors.

The Shanghai Composite Index has gained 22 per cent since Jan 1. On the other hand, the FTSE ST China Index, which tracks the performance of 58 China plays in Singapore, has fallen 9.1 per cent.

The only consolation is that Hong Kong - the other major bourse with many China listings - is languishing, too.

The Hang Seng China Enterprise Index - which tracks 43 China firms listed in Hong Kong, also referred to as H-shares - has slipped 7.9 per cent.

Attempts by S-chips - the name given to China shares traded in Singapore - to break out of the doldrums have been met with an equally determined effort by jaded investors to clear the backlog of what they now consider to be bad investment decisions.

Even stocks that stand to benefit from China spending billions to upgrade its infrastructure are not seeing any upswing.

Rail carriage maker Midas Holdings yesterday fell 1.9 per cent to 51.5 cents, despite attracting a recent 'buy' call from Kim Eng Research.

Some traders blame the depressed market conditions in Singapore for the lack of interest in S-chips.

Although the first two months of the year are traditionally the most buoyant for the stock market, daily average volume has languished at about 929 million shares worth $910 million.

That compares to the daily average of 1.8 billion shares worth $2.1 billion changing hands in the same period last year.

Some traders, though, believe Shanghai's outperformance is due to a strong liquidity injection from China's huge stimulus programme seeping into the stock market.

A recent Standard Chartered Bank report estimated that mainland banks dished out 1.62 trillion yuan (S$362 billion) worth of loans last month, as China leaned on lenders to keep credit lines open.

With so much money lent in such a short span of time, China is enjoying a liquidity-led boom. The rest of the world, meanwhile, is suffering from a credit crunch because banks are too scared to lend or too cash-strapped to do so.

As many of these loans are short-term borrowings, they may have been ploughed into the Shanghai stock market to earn better returns.

This explains why China plays elsewhere are not getting much benefit from its stimulus package.

Foreign funds, however, have gradually been turning positive on China as well, with more cash moving into funds that invest exclusively in China plays.

A Merrill Lynch survey of fund managers released yesterday showed that most of its respondents were no longer fearful of a prolonged slowdown in China. More and more fund managers were also anticipating corporate earnings in China to improve in the next 12 months, it added.

Whether these translate into more interest in China plays languishing in Hong Kong and Singapore, though, remains to be seen.

As remisier Thomas Lee puts it: 'It was boom time for S-chips before China tightened the screws on borrowing in late 2007. Now that credit in China has loosened up again, we can only hope that China plays will spring back to life again.'

This article was first published in The Straits Times.