China: The Market Is Not As Bad As We Think – Investment Insights
There’s continued talk around the market that Chinese authorities are now in a position to start pushing through more stimulus measures as growth starts to fall below government set limits. We saw some signs of that last week with monetary easing but we still haven’t seen a large, fiscal package of the start we saw following the 2009 downturn.
Losses in our Chinese Infrastructure Giants portfolio have started to narrow, following gains last week in Chinese equities.*The portfolio is now down around 10% for the year ending 11 March.* The best performers over the past month have been the most basic Chinese utility companies.* While concerns over Chinese equities have not completed died, there is a growing sense in the market that things may not be as bad as what the volatility on the Shanghai exchanges suggests.
We’re treading carefully here. Calling a bottom in any Chinese stock exposure, even those listed in Hong Kong, is dangerous and probably premature. But we are making the point that infrastructure companies have the ability to claw back losses and more on the back of short term government stimulus measures. We’ve gone on the record and explicitly called out Chinese online and internet stocks as attractive in the past few months. We’re now starting to entertain the thought that maybe, the more traditional and sometimes boring utilities are also worth adding on the watch list, should sentiment change.
One needs to keep in mind that the United States, Japan and Europe are still very loose in their monetary policy. Japan and Europe continue to dig in deeper. China is the largest exporting nation on earth, so it must also stimulate and plug holes in the domestic economy if it wants to maintain social cohesion. Pressure on Beijing may translate into more stimulus action.
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Invast Investment Committee
These are our initial impressions only, please make sure you always read all disclaimers on this website and individual reports very carefully. The Invast team of advisors are happy to answer any questions you may have, so give us a call today on 1800 468 278 or email firstname.lastname@example.org. Alternatively, use our live chat facility on invast.com.au.
*Past performance is not indicative of future performance. The calculation of the returns is based on the performance of the actual underlying securities, in accordance with the weighting envisaged by the portfolio. These performances exclude financing and commission costs.
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Chinese Infrastructure Giants
A selection of US listed companies that work in biotechnologies and robotics industries.
A selection of large, globally listed bulk commodity producers including iron ore and coal companies. Special focus on those with larger operations.