China for the longer term

Should China be dumped? I am still hanging on to my China shares but they have gone down a lot over the last year.

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If you are holding on to China shares you must believe that the trend against business is going to reverse.

At the moment China is tightening its grip on business by the day.

I only had one Chinese stock and it’s down over 80%. Im not sure if I just leave it now and watch it or just throw it into something high risk and speculative because holding on to it is probably the same high risk and speculative. I don’t really see how China is going to going into reverse here.

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There was a good discussion on this under one of FT’s Weekend Reads on China. Without wishing to become known as Mr Selective around these parts, I think China is still investable as long as you are selective, and I believe markets will soon start pricing that in.

I would consider reading The BABA thread and in particular the post

and the following post

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the Chinese government have a history of letting companies innovate and grow then letting regulation catch up. Investors have been reminded that investing in China always had these risks. The speed of regulation is radical but the choices are not. They benefit the Chinese people and support the growth of the middle class. My opinion is that China won’t suddenly ban innovation and growth but will rather attempt to redirect it to strategic sectors such as Semiconductors and Renewable Energy.

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It seem quite probable (although far from certain) that China will want increased access to foreign capital in future in order to continue to achieve their objectives as organic growth slows. You can draw your own conclusions about what this might imply wrt to future regulation, but if you are optimistic you might say the softening of their stance towards VIEs is possibly a first step back towards courting capital markets.

While I do expect this to be the general trend I still expect that certain sensitive areas will be very tightly regulated.

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My Chinese shares are through investment trusts, not direct companies, and hence offer diversification within China. I have held them for many years. Their prices have gone down by around 20-30% in the last year but it seems unlikely to me that the Chinese government will spurn foreign investment in the longer term.

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Also offers delisting protection as trusts will hold most their shares in HK/CN which are less available to you and I.

Yes. ITs have many advantages. Investment in shares of individual companies is much more of a gamble unless one has sound knowledge of the companies involved.

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@Cameron We should remember that China has a several trillion dollar relationship with Western Capitalism :slight_smile: I doubt that China is going to do much to jeopardise that.

China’s home grown capitalism i.e. State Capitalism is in principle: make loads of money, help with the Countries goals and we are all happy. Our own regulators in the west are, generally speaking, much weaker than the Chinese ones. And the Chinese have a myriad ways to intervene in their companies and markets to ensure that what gets done is what the state wants to get done.

So there is zero chance, using tabloid speak, that China “Shuns the markets” any time soon. The question really is “What industries/companies will China prioritise to pursue the new direction?”.

@J4ipod94 takes a stab at answering that question. The relevance to (future) investors in individual companies is a call on whether those companies fit with the story or not. For those of us that can’t or don’t want to make that call there may be a fund that we can off load that worry to.

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Interesting read on how China became Capitalist.

I think the reality is there are so many people in the west and China with skin in the game its highly unlikely anything catastrophic will happen. 42% of all goods imported to the USA are from China and this increases every year. The amount of businesses in both countries and the rest of the World reliant on this trade is huge.

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Best day for Chinese ADRs since 2008 today.

image

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Sobering comments from Baillie Gifford.

Slater added: “In retrospect, it has been a mistake to reduce our holdings in western online platform companies rather than their Chinese counterparts,”

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Shows that even the experts get it wrong. I don’t feel so bad now.:grinning:

I think it is far more nuanced than that. BG doesn’t think in terms of quarters. It is truly a long term thing.

Of course, but it still makes me feel better about some of my decisions. Fwiw, I’m buying an SMT share from time to time.

Ok - fair enough. They still made money. I hope you did too. But my comment is not about SMT it is about the topic of the thread and what the implications are for China investors.

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In terms of China, I’ve also been dripping dosh into a China ETF lately - I’m confident it’ll do well.

China might be down, but I’m pretty certain normal service will be resumed in a year or so.

This dude seems to be turning into the British equivalent of Jim Cramer. Literally today crossing the headlines is the likelihood of the Biden renewing tariffs on Chinese goods, something which I view as a huge tailwind to not only Chinese equities but inflation itself.

Might be worth inversing this guy…

That “dude” is managing a fund with a market capitalisation north of 10 billion pounds.

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