The Lemon Fool

I recall some posts where people have revealed reluctance to invest in Chinese corporates. There are clearly some risks that I don't intend to downplay, indeed I have lost 100% of my investment in one fraudulent enterprise. However, a few comments that may be food for thought.

A large and growing market that is too big to ignore?
- 2nd largest economy in the world
- In the next 3 years the Chinese economy is forecasted to grow $1.1 Trillion which exceeds the size of some major economies including France, India and the UK
- The Chinese economy was 10 times bigger in 2017 than it was in 2000
- By 2030 China is forecasted to be 20% of the world economy. It was only 4% in 2000
- China has 109 of the world's Fortune 500 companies
- China has 14 of the largest Banks in the world (The UK has 5, Japan 5 and the US 4)
- Whilst Chinese corporates benefit (as do US corporates) from an enormous domestic economy, they are increasingly investing outside China. Outward direct investment grew at a 19% CAGR between 2010 and 2016 with noticeable acceleration in 2016

Access
- HKEX provides access to many Chinese corporates. HKEX has been the #1 global exchange for IPO fundraising in 5 of the 10 years from 2008 to 2017. (I don't know how 2018 played out)
- The HKEX has recently relaxed listing rules which will allow it to compete better against Exchanges like Nasdaq for issuances with non-standard voting structures (e.g., Alibaba) and companies with less well established revenue histories (e.g., the biotechnology sector)
- Shanghai and Shenzhen - HK stock connect (with potentially others such as London to come) is increasing access for foreign investors
- Foreign holdings of Chinese Equities are growing fast with 111% growth between 2014 and 2017. Recent inclusion in MSCI indices suggests further growth to come

All facts stated above come from a highly credible authoritative source. I haven't checked them.

My personal view is that China merits some allocation in personal portfolios either through a broader Emerging Markets fund or China specific exposure. I am willing to accept some elevated volatility and a not immaterial percentage of my personal equity is exposed to China (including HK).

Wishing you good fortune with your investments in 2019. It has certainly started better than 2018 finished.

Pendrainllwyn

Pendrainllwyn wrote:- The Chinese economy was 10 times bigger in 2017 than it was in 2000

Pendrainllwyn

The gist of what you have said makes sense, except for this item which I think has got garbled.
2x bigger in 7 years would fit with GDP growth rates

Be interesting to get the same view of India

Yes to all your points about the size and importance of the Chinese economy but there is very little reason to think that any of the benefits of that would accrue to a western investor. I will stay well clear.

I'm happy to leave the investing decisions to the likes of Scottish Mortgage Trust who backed Alibaba, Tencent etc, rather than try to invest directly and end up buying scam Chinese AIM companies (even though recommended by the Investors Chronicle - eg Naibu).

I first visited China in 1985 and at that time it was decidedly third world in many ways. Even 10 years later there was not that much difference, but I watched Neil Oliver's Scots in China earlier this week. The progress is staggering. The trouble is that I would not know where to start and I would as has been said prefer to get any China exposure through a fund. I know nothing of regulation or much else about China so apart from holding HSBC and Scottish Mortgage I doubt that I have much exposure.

Hong Kong may be a better place to start because it seems to have cleaned up its act re investing.

Dod

GDP growth in China is slowing but is still impressive.
https://www.statista.com/statistics/263 ... -in-china/

GDP growth rates "animation" 1960 onward.
https://www.visualcapitalist.com/animat ... 960-today/

I asked a similar question about investing (April 18) in China as direct investment was set to become available.

viewtopic.php?f=31&t=11168&p=131808&hilit=China#p131808


I was advised of the risks. My "Chinese investment" is via collective funds ( SMT, Fidelity China Special Situations FCSS & HFEL...the latter for income.

Is "now" a good time ...Mr Trump's trade war negotiations having depressed the share prices of some of the funds with high % of their funds allocated to Chinese companies?

I agree that China's expanding economy is going to continue growing. And that implies a big increase in Chinese middle class wealth. The manager of FCSS, Dale Nicholls, is focussed very much on Chinese consumers, which I believe is a smart approach.

I regard FCSS as a long term hold (other funds/ITs are available!). In my view, now is a good time to invest in China, before the trade war is over.

Regards, ermintrade

I too have a holding of FCSS in my SIPP. Also SMT and HFEL but those are not specifically for exposure to China.

In answer to monabri I see that I contributed to the thread he highlights and I do not think I would change my then views. I forgot about HFEL which I also hold.

Dod