Tuesday, March 31, 2020

Will The Year Of The Pig Bring Home The Bacon For Investors?

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China’s celebrating the start of the Year of the Pig and investors hope the arrival of the animal, which is a sign of wealth and prosperity in the east, will bring home the bacon.

But the signs are 2019 may end with investors squealing rather than cheering.

Looking back, the last Year of the Pig coincided with the start of the global financial crisis.

Looking forward, China’s economic growth has slowed to 6.6% – the slowest rate of improvement since 1990.  The International Monetary Fund has projected growth will stutter again in 2019, falling to a new 30-year low of 6.2%.

To boost growth, China devalued the yuan and implemented and instigated plans to reignite the economy.

Trade tariff stand-off with USA

The country is also facing a major stand-off with the US and President Donald Trump hassling for better terms. Uncertainty of how this will end is also impacting China’s economy.

Nevertheless, most countries would happily swap their rate of growth to deliver 6% or more like China.

“The ongoing trade tension, alongside weakening domestic demand, has dampened the sentiment of investing in the Chinese market,” said Tracy Zhao, investment research analyst at The Share Centre

“The recent selling-off of Chinese stocks may still appear attractive to some investors who see value to invest.

Confusing approach for Western investors

“Investing in the region presents some concerns for Western investors. The government in China operates contrastingly to those of the West, corporate culture and structure can be confusing as well as the lack of reliable economic data.

“Therefore investors may wish to consider purchasing a fund. A fund will be managed by professionals who are specialists in a region and/or asset type. The manager has the time and expertise to construct a well-diversified portfolio and is supported by well-resourced teams of analysts, many of whom are able to meet companies in the region.”

The next round of trade talks between China and the US are scheduled for March 2. If no deal is reached, Trump has threatened to raise tariffs on $200 billion of Chinese exports to the US.

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