Three dos and don’ts for China equities

Bin Shi explains his China equity outlook H2 2019

From short-term to long-term, Bin Shi, Head of China equities, explains 3 dos and don'ts for China equities investing:

  1. Don't expect a swift resolution to US-China trade tensions
    In his view, the rivalry will run for a long time. Investors shouldn't expect a swift resolution but should prepare for an extended period of rivalry between China and the US.
  2. Don't fear volatility
    Ongoing tensions mean volatility will continue, but volatility isn't something to be feared. China's markets have been historically volatile, but volatility also presents opportunities for bottom up stock picking. Bin believes that the sheer amount of noise in both the markets and media from geopolitical issues makes it even more important for investors to focus on long-term trends and opportunities in China's economy.
  3. Do stay focused on what matters
    Crucially, Bin believes that long-term investible trends remain intact because China is:
  • Consuming: Chinese travelers are the world's biggest spenders on tourism and domestic retail sales are holding up quite well;
  • Urbanizing: China now has more than 600 cities, and their populations are growing as reforms play out;
  • Innovating & Automating: China's industries now have the biggest stock of installed robots in the world, and that number is expected to grow;
  • Aging: As demographic trends play out, around one-third of the population will be over 60 by 2050, creating massive demand for industries like healthcare and insurance

Moving beyond these long-term trends, Bin pointed out that current valuations on Chinese equity markets still remain attractive compared to both historical levels and other markets in the Asia-Pacific region.

Bin also highlighted how choosing the right strategy can be crucial to locking in performance. Reforms have opened up China's onshore markets, and now an All-China strategy can focus on the best opportunities – wherever they may be, either offshore or onshore.

Looking ahead, Bin repeated that investing well over the long-term means ignoring the noise and focusing on what matters. And with a range of attractive trends still playing out in China, plus new opportunities and strategies emerging from ongoing reforms, there remains much to look forward to and invest in.

A risk is a risk if you are not prepared for it. We are focused on two things: companies with strong fundamental support and companies with good valuation support. If we do a good job with these, the companies we select will likely stand a good chance of enduring trade-tension-driven market volatility and growing over the longer term.

Bin Shi, Head of China Equities

Hong Kong Retail Investors

  

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