How to invest in “Modernizing China

I believe that investors are well aware that the factors affecting the decline in the Chinese stock market over the past period are caused by 1. The Chinese government’s access to large technology companies 2. Conflict with the United States 3. Policy Zero Covid and 4. Problems in the real estate sector All this contributed to the low growth rate of the Chinese economy.

From IMF (Source IMF Regional Economic Outlook Report for Asia and the Pacific) Growth this year is forecast to be 3.2%, the second-lowest growth rate since 1977. The recovery is also expected to be challenged by the COVID policy and real estate issues.

Investors are also keeping an eye on the 20th General Assembly of the Communist Party of China, which is leading to disappointed foreign investors, especially economic issues and the Zero Covid policy that have not been discussed in a relaxed manner as expected and

includingThe appointment of a new Politburo Standing Committee by academics is in favor of increasing President Xi’s powers. Absolutely Jinping Because the four newly appointed committee members are all former subordinates who worked with President Xi. Jinping before

As a result, there may be an imbalance of power, but on the other hand, the Chinese people see it as a reduction in political conflicts and better reforms and policy decisions.president color Jinping has announced a strategic plan for the next five years called “Chinese Modernization”. It is not precise, but it is expected that it will still emphasize the common prosperity approach, which is different from the western capitalist world.

This will reduce the inequality in the country and still want to raise the level of the people to have higher standards on a sustainable basis. After the meeting, China’s stock market, especially large technology stocks and Chinese stocks listed in the United States (Chinese ADR), fell more than 6%. Foreign outflows were the highest in the year (Source Mr Richard Tang, CFA, Julius Baer Hong Kong Bank).

Analysts at Julius Bear also estimate that Chinese stock markets remain volatile in the short term. As a result, we still have a cautious view on investing in the Chinese stock market. It is expected that in the future, the Chinese mainland stock market index or A-Share will outperform the Chinese stock market listed on the Hong Kong Stock Exchange or H-Share because the A-Share market will have better growth . (Source Mr. Richard Tang, CFA, Julius Baer Hong Kong Bank)

However, we expectChina’s stock indices as a whole will move in a wide range (Fat and Flat trading range) Investors should choose sectors or stocks (Alpha over Beta). 1. Groups that benefit from government policies around the world, not just China. That’s environmental policy. With a policy to reduce carbon dioxide emissions through the use of clean energy (China’s Green ambition), China currently accounts for nearly 90% of the world’s solar panel production and 76% of global electric vehicle battery production.

However, although these stocks have also declined in the past due to Chinese and global stock markets, we still see them as a long-term investment opportunity (source Julius Baer Research Focus on Cleaner China. Making China’s Green Ambition a Reality October 12, 2022) 2. Domestic conglomerates benefit from domestic consumption 3. Smart manufacturing that the Chinese authorities want to develop modern technology without relying on foreign countries

However, the issue to watch in the later period is 1. Gradual publication of third quarter financial statements of major Chinese technology companies in mid-November.analysts were also expecting the effect of the Zero Covid measures in the last quarter and 2. No Covid Policy Issues The disappointment in the past has caused investors to greatly lower their expectations, giving them an opportunity to return to a positive surprise.

3. Problems in the real estate sector, although the government has tried to find measures to solve the problems, but the situation has not improved, making it unable to gain confidence for consumers and investors. However, the investment is risky, those interested in investing should contact to inquire and receive more information from your investment adviser to study the details and find the investment that suits you .


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