Time for the China MarketPosted on January 23, 2013
Back in October last year we talked about the Chinese stock market, and how reform might make it a good time to buy. It turns out, we were pretty close to the mark, just two months early.
The Shanghai market, has started zooming since early December. In fact it is up 18% in a month and a half from its low and 10% since we mentioned it in late October.
That’s not bad at all.
Will it continue? We think yes.
How does that compare to other markets?
The last few months has been a decent trend for the markets, but the Shanghai exchange has outperformed.
|Price Growth Dec 1, 2012 – Jan 23 2013|
|Dow Jones Industrial||5.2%|
|Australia ASX 200||6.3%|
|Stoxx50 – Europe||5.4%|
Will the Shanghai market keep going?
We think it will keep going for a couple of important reasons.
1. Confidence is back in China
Last year confidence in China, particularly amongst Chinese businesmen that we know was pretty low, but that started to turn once the National Congress confirmed the rise of Xi Jinping. It was partly due to his “Southern Tour”, symbolically following in the great reformer, Deng Xiaoping’s footsteps. Partly it was due to conversations we had with well connected friends who have heard rumours of a real timetable for RMB and interest rate liberalisation with solid dates. It could also have been iron ore prices on a rocket ship (up 75% in two months!), suggesting that many steel makers expect better demand this year. Whatever it was, the confidence indices are showing it too. Confidence sends money.
As we mentioned in our previous article, the Chinese government has shown a policy decision to support the market. It has for example lifted the investment quotas for foreign investors and has commented it might lift them even more. You know they must be keen for better conditions when even foreign access is increased.Why? Perhaps the government is keen to get a few more IPOs moving given the reported back-log of 900 plus companies waiting for an IPO.
3. It is low historically
The last time the Chinese market was this low was in the immediate aftermarth of the global financial crisis in late 2008 and early 2009. From there it recovered quickly to 3,500, a nice little 75% gain for those playing at home.
China it is? So what do I buy?
We usually say, “buy an ETF”. But NOT this time. Why? All China focussed ETFs buy shares of companies listed in the United States or Hong Kong. You’ll get correlation with those markets and not with the Shanghai market.
A fund with Shanghai quota access
For true China A share market correlation you need a fund that has access to quota to directly invest in the Shanghai market. These are rare for average investors, but we have access to one for our clients. Contact us on firstname.lastname@example.org or (021) 3366 1337 to gain access.
About Caterer Goodman Partners
Caterer Goodman Partners is a Shanghai based wealth management firm established with a clear vision to provide a new level of personalized financial planning services for expatriates in Asia. Our financial advisors provide guidance for our clients in all areas of investment, specialising in managed accounts, money-market funds, retirement planning and alternative investments. At Caterer Goodman Partners, we offer our advice and experience to provide low cost, tax-effective and simple solutions to match our clients’ interests.
About Owen Caterer
Since graduation Mr Owen Caterer has worked with the Queensland Premier's Department in Trade Facilitation and then as a financial adviser in Shanghai from 2005 until 2010. He then rose to Senior Adviser, then Business Development manager and then to Chief Investment Officer responsible for portfolios to a value of US$280 million across Asia. Following that Mr Caterer left to found his own firm with a partner in the financial advisory and wealth management area. This focused on developing China and Asia's first fee-based financial advisory (rather than commission-based). This has grown to now have 8 staff and and managing almost US$35 million for clients throughout Asia. This business success was recognized as a finalist in the 2013 ACBA in the Start Up Enterprises category and are one of a small number of foreign managed firms to have a full asset management license in China. Owen has also been active in the community volunteering for the Australian Chamber of Commerce in Shanghai and acting as the Vice-Chair of the Small Business Working Group (2012-2014) and as the Co-Deputy Chair of the Financial Services since 2013 until the present. They have continued to grow their business and have now been selected as a small group of companies who are platinum members of the Australian chamber of commerce. The achievement they are most proud of is their efforts to reform the financial planning industry in China and push it away from a hard-sales commission driven model to a more ethical management fee and long term customer service model. Owen has a Graduate Diploma of Applied Finance from the Securities Institute of Australia of which he was a member as a Fellow of Finance for many years and also has an undergraduate degree from Griffith University in International Business. Owen's interests are tennis, running and his wife and two children. He speaks fluent Chinese, first arriving in China in 1997.
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