You may have seen much negative press about the Chinese share market over the past month. I would like to put this into perspective. Firstly, the Chinese A share market which is the market that has fallen dramatically is only available to the domestic Chinese population. Most clients access the Chinese Share Market via international managed funds which are based outside of China and thus do not have exposure to the A market. Fund Managers who have exposure to China invest mainly via The H share market and Hong Kong. These markets have fallen less than a quarter the amount of the A market.
CHINA: HARD LANDING OR BUYING OPPORTUNITY?
You may have seen much negative press about the Chinese share market over the past month. I would like to put this into perspective. Firstly, the Chinese A share market which is the market that has fallen dramatically is only available to the domestic Chinese population. Most clients access the Chinese Share Market via international managed funds which are based outside of China and thus do not have exposure to the A market. Fund Managers who have exposure to China invest mainly via The H share market and Hong Kong. These markets have fallen less than a quarter the amount of the A market.
Secondly, the local share market represents a very small percentage of China’s Gross Domestic Product, so it has only a minimal impact on growth in China.
In addition, the Fund Managers we employ, such as Premium China are bottom up stock pickers, so overall macroeconomic issues have a minor impact on their medium and long term goals and performance.
HOW DOES THIS AFFECT AUSTRALIA?
There is no doubt that what happens in China plays a huge role in the performance of Australia’s economy. China is our biggest trade partner and a massive importer of our natural resources. The good news is that with the mass urbanisation which will continue for at least a decade and 6.5% growth in the Chinese economy predicted for the coming years, it is impossible to see demand for our resources and other exports falling too dramatically. The press keeps publishing concerns about Chinese growth falling. The truth is that this was designed deliberately by the Chinese government to curb inflation and keep the level sustainable for coming decades. Also, it is impossible to keep up double digit growth rates as the economy grows and its base gets bigger and bigger. Besides, any other country in the world would be ecstatic to be growing at 6.5% per annum.
In conclusion, it is our view that what is happening in China is a short term glitch and has been extremely overplayed by the media. We do not foresee their being a major negative impact in the Chinese or Australian economy over the medium to Long Term.
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The Full Article Spotting The Bull In China Equities
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