China investing: 10 takeaways for the Year of the Rat

The Year of the Pig was a positive one for China's equity and fixed income markets, but what's in store for the Year of the Rat?

22. Jan 2020

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 January 25th, in 2019 it was on February 5th.
  • Every year has a different animal according to the twelve signs of the Chinese zodiac. 2019 was the Year of the Pig and 2018 was the Year of the Dog.

Chinese folklore says rats are a sign of wealth and surplus; more than that, personality-wise they are said to be clever, quick thinking and successful - fine attributes indeed for investors1.

10 snack-sized soundbites

What we know for sure is that rats like small-sized snacks, so we have produced some bite-size bullets to give you a taster on how you might approach China investing in 2020.

#1 - For prosperity, think housing:

China's top developers grew sales revenue in 2019 and China housing is a key sector for our China High Yield strategy;

#2 - Get comfortable with slow growth:

China's economy is slowing, but Bin Shi believes that needn't be a problem for investors with the right strategy. China is easing monetary policy, but will likely do so with a drip-feed approach rather than a huge credit boost;

#3 China is leading the charge on climate action

China has gone from being one of the planet's biggest polluters to becoming a world leader on climate action in just one decade. Our ETF and active teams think China ESG offers investors an opportunity.

#4 - Forget the basket, take the golden egg:

A standalone approach to China investing might yield better results than allocating to China as one part of a basket of emerging market countries;

#5 - Valuations are reasonable:

Going into 2020, valuations on China equity look reasonable compared to previous years and developed markets;

#6 - It's ok if you don't like risk:

A multi-asset approach that allocates to China with a mix of bonds and equities can be the way forward.

#7 - What's hard to love might pay off in 2020: 

State-owned enterprises (SOEs) are a drag on China's economy but Bin Shi sees green shoots among SOEs which might create equity investing opportunities in 2020;

#8 - Mars – the 'red' planet?:

China is planning a trip to Mars in mid-2020 and we think Chinese tech innovation could be a major investible trend;

#9 - Rats? Think silver foxes:

Silver foxes hold the key to opportunities in China, learn more about them in 'China's silver economy';

#10 - You don't have to live with negative yields:

Onshore China fixed income offers positive real and nominal yields;

So while this year might be different to the Year of the Pig in 2019, we continue to believe that China offers a range of investible opportunities. Get in touch to learn about our range of China strategies.