Today sees China celebrating the Chinese New Year, and this year will be welcoming the Year of the Pig. But how will it bring luck to the markets this year?
Will investors bring home the bacon this Chinese New Year?
In Chinese culture, pigs are a symbol of wealth, with their chubby faces and big ears seen as a sign of fortune.
However with growth in China slowing to 6.6% in 2018, its weakest pace since 1990; and with the last Year of the Pig coinciding with the start of the global financial crisis in 2007, investors in the region may need more than good luck to help them bring home the bacon in 2019!
In response to softening growth in 2018, the Government of China adopted a stimulus to reignite the economy and devalued the Chinese Yuan to boost export and offset tariffs already imposed. In January the International Monetary Fund (IMF) projected China’s economic growth for 2019 to be 6.2%. Despite this slowdown it should be noted long-run GDP growth is significantly higher in China than that of developed markets in general.
The scheduled date for US-China trade talks is 2 March 2019, where no deal would see President Trump more than double tariffs on $200bn of Chinese exports to the US. This ongoing trade tension, alongside weakening domestic demand, has dampened the sentiment of investing in the Chinese market.
The recent selling-off of Chinese stocks may still appear attractive to some investors who see value to invest.
Investing in the region presents some concerns for Western investors. The Government of 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 particular 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 two funds detailed below can be found on our preferred list, the Platinum 120, they are well-established with disciplined management and experience of manoeuvring the stock market’s ups and downs:
Janus Henderson China Opportunities aims to provide a combination of capital growth and income. The manager Charlie Awdry, who is supported by a well-resourced team, is not afraid of replacing stocks when market expectations change.
Baillie Gifford Greater China has the objective to produce capital growth over the long-term. The managers follow a very well-defined investment process and their stock selection is a large contribution to the performance of the fund.
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