YES

1 Recent slump opens up buying opportunities

The meltdown, which saw many China plays sinking to 52-week lows, presents a buying opportunity.

The worst may be over, and the downside risks for investors buying China stocks have become more limited as the companies are sitting on big cash pools.

'The current levels mean a high margin of safety for entry. Go for the Chinese blue chips, which have already become blue-black,' said DMG & Partners Securities senior dealing director Gabriel Yap.

2 Fresh interest from institutional investors

New buying interest could come from special Chinese funds that can invest in markets overseas, called Qualified Domestic Institutional Investor (QDII) funds.

'More and more QDII funds in the pipeline for government approval are including Singapore as one of the markets they will invest in,' said China-based QDII fund manager Rex Chen.

3 China growth story

China's economic boom looks set to continue - the International Monetary Fund expects 9.3 per cent growth this year and a similar level next year.

OCBC Investment Research head Carmen Lee said: 'S-shares still have their investment merits given China's strong consumption and rapid economic growth and the rising affluence of its population.'

4 More attractive than peers in Shanghai, Hong Kong

Now, S-shares offer more attractive value relative to mainland China shares listed in Shanghai (A-shares) and in Hong Kong (H-shares).

'S-shares are almost back to their 2004 low valuations, just before they staged powerful rallies from 2006 to October 2007,' said Mr Yap.

5 Yuan appreciation

The fast-strengthening Chinese currency is an added incentive to buy S-shares.

As the yuan appreciates against the Singapore dollar, S-shares will also benefit from a translation of their profits and dividends from yuan into Singdollars.

PrimePartners research manager Lim Keng Soon said: 'A strong yuan bodes well for S-shares as the appreciation of the yuan will outstrip any potential gain in the Singdollar.'

NO

1 Market recovery may be limited

Some market players warn the recent rally might prove to be a bear trap - with prices recovering only briefly before falling again.

S-shares are seen as growth stocks that carry higher risks, so they tend to fall more sharply than blue chips in times of economic uncertainty and high inflation.

Moreover, China's plan last August to let citizens buy shares overseas directly has been shelved. Beijing was concerned that funds would pour out of China, hampering the development of domestic markets.

2 Regulatory uncertainty, disruptions from bad weather

Recent government moves such as price ceilings for food and tightening of the property market add to investor uncertainty.

Such moves were compounded by bad weather a few months ago as China faced its worst winter in 50 years.

CIMB-GK research head Kenneth Ng said: 'In addition to government-led controls, natural disasters can be extremely detrimental to earnings in the short term.'

3 Inflation at 12-year high

Inflation in China has shot up to a 12-year high, mainly because of fast-rising food costs, prompting Premier Wen Jiabao to look at 'forceful' countermeasures.

Higher interest rates and reduced export rebates could hurt corporate earnings. Add soaring commodity prices and rising labour costs, and cost pressures will increase for companies such as food processors.

A DBS Vickers Securities Group Research report said to avoid firms likely to face margin compression, especially any arising from commodity price pressure, as they may not be able to pass on the costs.

4 Slack corporate governance

Proper corporate governance is still lacking in many Chinese companies. PrimePartners research manager Lim Keng Soon said: 'Concerns about standards of corporate governance and accounting are very real.'

Analysts urge investors to take extra care when choosing an S-share, as they need to understand the company's management and background.

5 First-quarter earnings woes

Investors jumping in now could be in for some short-term pain.

Analysts foresee earnings dips when the first-quarter reporting season starts this week given poor weather and profit erosion from cost pressures.

For example, frozen food maker Synear Food Holdings expects first-quarter sales to be as much as 10 per cent lower than a year ago because of the recent snowstorm.