The Chinese market in terms of valuation isn't cheap. It would be best to shift out of H shares into Hong Kong blue-chip stocks.

The market will start to speculate whether the latest [China rate] rise is the first of a series.

At this level, global funds may start to move their bond holdings back to neutral, and the earnings yield ratios of the S&P 500 and MSCI World will move closer to the normal level, bonds no longer expensive or equities no longer cheap on a relative basis.

These are the two major sources of global liquidity. If both of them reverse, it is not going to be good for the global equity market, but it is too early to say that we are at the turning point.

A major momentum play in the region within the past two months is the H shares. We recommend investors take profits when there is still liquidity available.

If the rate expectations continue to come down, Hong Kong, as an interest rate sensitive market will likely benefit. Moreover, if the interest rate expectations drop, the U.S, growth expectations will also taper off. This will also encourage money to flow from the growth sensitive markets, notably Korea and Taiwan. Hong Kong will be an idea destination.