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February 2016

China leads market falls, but is now the time to invest?

This Monday 8th February marked the Chinese New Year, which is that of the Red Fire Monkey. According to the Astrology Club, “the influence of the monkey puts everything in a state of flux and anything can happen. However, finances, politics and real estate should take an upturn and a lot of global economic growth can be expected”.

Whilst I’d like to believe the second half of this horoscope, I suspect the first half may be more apt!

Research Elite Rated Chinese equity funds and Elite Rated Asian equity funds

Shares at a 13-month low

Already, since the start of our new year on 1st January, trading on the Chinese domestic stock market has been suspended twice and shares have fallen to a 13 month-low.

That the Chinese economy is slowing is not news to us; it's been slowing for a few years now. Neither is the idea of the Chinese government interfering in market forces a surprise. In the same vein, I don't believe I've ever seen anyone quoted as saying that the rebalancing from an investment-led to a services-led economy was going to be easy!

A growing concern, however, is around the increasing need for the Chinese to devalue their currency. But that's a concern for the rest of us, not necessarily the Chinese.

For some time now, other major economies have been devaluing their currencies and China has been absorbing our weakness. If they devalue, however, they are effectively exporting deflation to the rest of the world and that's something we really don't need at the moment.

A long-term opportunity?

With share prices in China having fallen significantly, opportunities are beginning to emerge, but as an investment, China, and indeed wider Asia, are considerably out of fashion, as evidenced by our poll last month.

Just 3% of FundCalibre equity investors are considering putting their money in the region this year. Caution is still required, as the situation could easily get worse before it gets better, but long-term investors with the spare cash, could perhaps consider buying on the dips.

Read more: Where next for China?

Research funds

Elite Rated Chinese equity funds:
- Invesco Perpetual Hong Kong & China

Elite Rated Asian equity funds:
- Matthew Asia Pacific Tiger
- Aberdeen Asia Pacific Equity
- Aberdeen Global Asian Smaller Companies
- Hermes Asia Ex Japan Equity
- Schroder Asian Alpha Plus
- Schroder Asian Income
- First State Greater China Growth
- Goldman Sachs India Equity Portfolio
- Stewart Investors Indian Subcontinent

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Sam Slator, Head of Communications - February 2016

©2016 FundCalibre Ltd. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre Ltd, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre Ltd, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete, or accurate. FundCalibre Ltd shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use.