1. 2018 was a challenging year, what's your view on 2019?
In 2018, US-China trade tensions and the Chinese government's deleveraging policy impacted the economy and markets, so performance came in below expectations.
Looking ahead, we see better prospects in 2019 because we believe that China and the US will resolve their trade issues and that the government will ease back on their deleveraging policies and deliver support for the economy.
Because investor sentiment suffered in 2018, many high quality companies saw their valuations come down significantly, so we think there is room for good quality companies to perform in 2019.
2. In Q4 2018 you said you would increase your allocations, do you still plan to do the same in 2019?
We have been putting more cash to work because we believe valuations for many high-quality companies look attractive.
Furthermore, we believe the policy support measures announced by the Chinese government will begin to positively impact the economy and the market later on in 2019, so we believe we have to be positioned now.
5 facts about Chinese New Year:
- Moon cycles decide the Chinese calendar and New Year is celebrated on the second new moon after the winter solstice.
- Since moon cycles vary, the date of Chinese New Year changes from year-to-year. This year it is on February 5th, in 2018 it was on February 16th.
- Chinese New Year is not just specific to China, it is also celebrated in Taiwan, Thailand, Vietnam, Singapore, Hong Kong, Malaysia, Indonesia, and many other locations around the world.
- Every year has a different animal according to the twelve signs of the Chinese zodiac. 2018 was the Year of the Dog and 2019 is the Year of the Pig.
- Since there's a week-long holiday in China, millions of people are off work and an estimated 400 million people will be travelling.
3. What do you think will be the main driver for the Chinese economy going forward?
China's 'demographic dividend' and low land prices have been major contributors to China's past growth.
Looking forward, these factors will still be big drivers but the key factor driving China in the future will be further reforms to release the potential of Chinese companies.
4. What advice can you give equity investors about market prospects for 2019?
Investor sentiment deteriorated in H2 2018 but that's an opportunity for disciplined investors because it means cheaper valuations for good quality companies.
And don't forget that, despite market volatility, fundamental growth drivers, like consumer demand and urbanization, still have a long way to run.
Take urbanization for example. If you are in a modern city like Shanghai, you'd probably think that the process has run its course, but if you went to other areas in China you'd find there is still room for urbanization to grow.
So I'd remind investors not to pay too much attention to headline GDP numbers. Doing that means you may miss out on the fundamental and long-lasting structural changes happening in China's economy and society that are creating attractive investment opportunities, particularly in new economy sectors.