The end of China is the “consensus of the day”, and without a question with fundamental justification behind it, after all, China’s 2009 stimulus package was unprecedented as a percentage of the economy, money was severely misallocated building projects producing negative return on capital, and many Chinese companies proved to be fraud. So here you go, China is basically finished, all one has to do is sell everything related to China and spend his resources elsewhere.
If we lived in a none complex, simple system type of world, you could potentially write off China and look elsewhere, but this is not the case, and things are not as simple as they seem, after all, economies are far more complex and dynamic.
Below is a two year chart of China’s new growth ETF trading in Shanghai, the ETF is composed of young, up and coming companies, does this chart looks like the end of China to you?
Living in China for the past decade, you learn to appreciate the complexity of the country and the money making opportunities around you. Despite the catchy “end of the world” headlines you see everywhere, headlines designed to trigger your emotions with the hope that you might click on some advertisement, businesses ignoring the news and focusing on making money are doing fine, just ask Burger King, now aggressively expanding into China,
or look at other consumer related businesses across Asia, now tailoring their offerings to Chinese consumers. It is a blessing no one told these businesses that China’s economic boom is over.
China’s consumer sector is booming and full of opportunities, but that’s not all. Even if one decides to invest in the worst sectors where most of the pain should be felt, i.e. resources, banking, government sponsored enterprises etc… it is far from a given that from these levels, such endeavor is a money losing proposition.
The local market which is mostly composed of these problematic sectors is statistically cheap and have likely priced in a lot of the bad news. Buying under-owned, hated, statistically cheap markets does in fact have positive edge over time, especially when the technical picture seem to improve.
A turn in China A50 ETF ? Need good close above $9HK
Last, I would also say that it is somewhat ironic that Hong Kong ETF is breaking out to new highs after few years of consolidation, that too does not go hand in hand with the end of China, does it?