Invest
The China outlook: Where the opportunities lie in 2019
Despite concerns that the Chinese market’s record bull run may be coming to an end on the back of poor US/China relations and industry slowdown, investors should remain positive as China’s government moves to provide stimulus to the domestic economy.
The China outlook: Where the opportunities lie in 2019
Despite concerns that the Chinese market’s record bull run may be coming to an end on the back of poor US/China relations and industry slowdown, investors should remain positive as China’s government moves to provide stimulus to the domestic economy.
According to Fidelity International’s China-focused portfolio managers, there will be a number and risks and opportunities facing investors in 2019.
According to Raymond Ma, portfolio manager for the China consumer sector, while US trade tensions will take their toll on the equity markets, the Chinese government is expected to respond with measures to support internal fiscal growth.
“Chinese equity markets are expected to remain volatile in the near term, due to concerns around escalating trade tensions between the US and China, a depreciating renminbi and a potential slowdown in the Chinese economy,” he said.
“Given the rise in trade tariffs, Chinese corporates are expected to witness a decline in exports, and a reduction in earnings and capital outflows, as some companies consider shifting their production base outside China.
“The good news is that the Chinese government is likely to introduce more fiscal and monetary loosening policies to support the domestic economy and consumer sector. As a result, money supply and liquidity conditions should improve going forward.
Mr Ma said the fixed asset investment is expected to continue in growth, while reforms will give encourage production productivity.
“We could also see an acceleration in fixed asset investment growth, while consumption growth is expected to remain relatively resilient. Ongoing supply-side reforms are also likely to boost China’s production efficiency and improve corporate earnings.
“With the recent correction in equities, market valuations have fallen. Consequently, we may see a window of opportunity in the next two to three quarters as some resolution is reached on the trade war,” he concluded.
Jing Ning, China portfolio manager at Fidelity International, agrees adding that the current low-growth environment is likely to stabilise the economy moving forward.
“China has entered a relatively low-growth phase of economic activity, compared to a decade ago. This has positive implications: the economy is likely to be less cyclical, and structurally driven by consumption, rather than fixed asset investment,” she said.
“Chinese corporate balance sheets have significantly improved and companies are more conscious about capital expenditure, while managements are adopting a more mature approach towards efficient capital allocation and reducing leverage. In a distinct shift towards increasing shareholder value, dividend payouts are also garnering attention, which markets have so far under-recognised.
She said despite trade tensions continuing to be a concern, Chinese corporates remain innovative and an increasing workforce may see growth in key growth areas such as technology and automation.
“The external trade-related matters reflect the emergence of a new age in Sino-US relationships, where there is likely to be less emphasis on co-operation. Nonetheless, the momentum of innovation at Chinese corporates is quite positive, which provides thrust to its extensive integration in global manufacturing value chains,” she said.
“China also has substantial human capital in its universities and vocational schools, which it can potentially monetise over the next decade in areas such as automation, health care, media and technology.
“As China faces external uncertainty, it will respond with measures to stimulate internal growth. Chinese policymakers have a clear intention to support economic activity, which they have demonstrated on several occasions in 2018. The series of Reserve Requirement Ratio cuts seen during the year is one such manifestation of this intent. While the impact of additional liquidity will be felt with a lag in the economy, it confirms that policymakers will be proactive,” she concluded.
Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more
Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more
Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more
Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more
Stock market
Facebook debuts new name
Zuck gets meta. ...Read more
Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more
Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more
Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more
Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more
Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more
Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more
Stock market
Facebook debuts new name
Zuck gets meta. ...Read more
Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more
Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more
Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
