Chinese takeaways....

🧧 Investing in China in the year of the tyger

Gong hei fat choy(恭喜发财),
🧧Best wishes, wishing you happiness and prosperity.🧧

Tyger Tyger, burning bright, 

In the forests of the night; 

What immortal hand or eye, 

Could frame thy fearful symmetry? - The Tyger, William Blake

MBMG’s Paul Gambles told Bloomberg’s Haslinda Amin last week that making sense of the outlook for the Chinese market is “a hard call for anyone” before adding “the consensus is expecting that there will be government support for the Chinese economy and the Chinese market and to us, that absolutely makes sense", although Chinese markets have moved lower, creating a potential buying opportunity - https://www.bloomberg.com/news/articles/2022-01-28/wall-street-s-big-bet-on-chinese-markets-is-going-all-wrong

China has grown reasonably well during the last two years, despite the pandemic, largely because exports  and the balance of trade have been strong. So even though China's been in a stringent lockdown, it's still been doing business with the rest of the world but what I think we're seeing now is that there's going to be a pivot where we expect there to be much more significant global demand weakness.
 

MBMG: World Economy In Structural Deflation  January 28th, 2022, MBMG Group Co-Founder & Managing Partner Paul Gambles believes the world economy is in structural deflation. He was speaking with Haslinda Amin and Rishaad Salamat on "Bloomberg Markets: Asia." (Source: Bloomberg)

"We think that the export part is really going to come under pressure, but on the other hand at some point we're going to get reopening in China and we think there's going to be an increasing move towards supporting domestic demand, as part of that. So I that we will see support in that environment, domestically focused companies, which are often a lot of the smaller companies, so these are the ones that we expect to do well.”

Asked which stock to buy, Paul agreed that generally valuations are looking cheap, but Chinese indices are problematic because there are so many businesses that have grown so quickly and are at different stages of growth, so from sitting here in Bangkok, we wouldn't generally go into it on a stock picking basis but instead we’d use a fund, typically Matthews, Asia’s China Small Companies that we've known for many years on and off when we favour taking exposure to the China domestic market, and that generally it's outperformed the indices and it's outperformed what we think we could achieve by stock picking in China. 
 

You need an active manager on the ground in China to pick stocks and for us, Matthews is the best one we’ve found. In terms of timing, one thing that we'd recommend is people take a look back at the, the original Bernanke tape tantrum, because when US tightened, China stepped up with the biggest disproportionate credit creation program we'd ever seen. I think we're going to see Chinese banks lending again and the government supporting again, but China has very different policy perspectives to anywhere else. 

Chinese policymakers act very quickly, they act very aggressively, but they'll also do something that we don't see in the west, which is they'll move to curb bubbles as well.

So I think what we're expecting to see is, policy support and bank lending numbers improve. We want to see the property sector stabilized and we think that China could at that point we really move up very strongly, but, like 2015, we also think you need to be looking for your exit because, China could take that support away from markets if asset prices are too strong. 

Chinese policy doesn't do the Western thing of letting bubbles grow and grow. So you have to look for the, the bubble creation signs, but chances are, you might have missed it. So start buying gradually now on the way down and more than anything, get ready to look for the exit door because it might not be a long run play.

Thank you to everyone for all the feedback on our recent reports  
👉🏻 "Existential Risk - Why We All Need to Pay Attention to Urkaine" (Published on 20/01/2022)  and
👉🏻"Double Fault" which looks at Novak Djokovic Australian debacle and CSFB.  

Wishing everyone, everywhere profound happiness, great wealth, excellent health and the best of fortune.