Category: Thoughts

[This is a short note because its purpose is to flag an ongoing headache rather than dwell on causes, symptoms or possible cures. I may return to those in due course.] Avoidable Calamity The title of this note should have been the headline for the story that was run by the Financial Times on January […]

I’m not just referring to the last couple of years. In work published* in the Q4 edition of the Financial Analysts Journal you’ll find this observation “.., since 1997 the market with the fastest growing economy [China, out of 43 that made up the MSCI World Country Index] has posted one of the lowest stock […]

China’s stock markets have progressed, in the last three years, not necessarily to investor’s advantage. A look at the performance of broad indices over the period is self explanatory: Shanghai Stock Exchange Composite Index -25% Shenzhen Stock Exchange Composite Index -36% Hang Seng China Enterprises Index -7% Summary Conclusion Presently, nothing good can be said […]

The IPO process in Hong Kong, as I’ll explain in this note, has been a serial value-destroyer in the last couple of years and part, but by no means all, of the problem lies within the industry that greases its wheels. It is investors though that must shoulder the final responsibility for a system that […]

In Brief The short-term macro outlook for Emerging Markets (EM), of which China is the largest, is poor; but stock prices have moved a long way to reflect this. This isn’t a compelling argument for fresh engagement. It is however a strong argument for investors already involved to Hold-Fast. Preamble The macroeconomic outlook for EMs […]

Preamble Investors who bought shares early in today’s China-tech-darlings have done well. If you were in the right stocks, at the right time, heavily weighted your portfolio in that direction and have taken no profits on the way up, you will now be, minted. Congratulations to the lucky few described above. Most investors, however, were […]

“Sometimes, a question is easier to answer if it’s inverted.” Me (channeling Chazza Munger). China stocks rose in 2017, but weren’t in a ‘bull-market’; they were continuing a recovery from a crushing begun in August 2015 that reached its maximum intensity in January 2016. As we head into 2018 it seems reasonable to ask; is […]

I’ve told myself, and others, the real excitement in China today is in the smaller cities; and it is. Therefore, in the last few years I’ve concentrated my travels into the lesser metropolises. Thus, I felt a catch up with vanguards of China’s progress, the cities of Guangzhou and Shanghai, was overdue. Fresh from a […]

Q. What do these names have in common? Bass, Chanos, Chang, Chu, Dalio, Druckenmiller, Edwards, Faber, Li, Odey, Soros and Xie? A. They belong to just a few of the people who in recent years have all made bold, dire proclamations about China’s prospects; and none of them, not one, has been correct. A Brief […]

Preamble Bar the last condition in the definition* below we are living, right now, in an economic boom  i.e. a ‘Period that follows [The] recovery phase in a standard economic cycle. A boom is characterized by an economy working at full or near-full capacity, strong consumer demand, low rate of unemployment, and a rising stockmarket, […]

I was flicking through my archive recently and found the note, written exactly ten years ago today, reproduced in its entirety at the end of this short message. If you don’t have time for the full read here’s the micro-summary. In August 2007 it was obvious that losses banks were taking and inevitably heading into […]

The world, economically at least, is in the best shape it’s been since before the GFC. Whether it was the quantitative easing or just the passing of time not only have the world’s major economies been spared a great-depression they’re now in synchronous recovery. Perhaps this is as good as it gets? Or perhaps gains […]

Preamble Facts, in plain sight, convinced me in September 2014 that China was heading for a hard landing; and, thereafter plus or minus, that’s pretty much what we got. [You can find that piece here Hard Landing]. China’s slowdown has been part product of a difficult global environment and part product of a policy to jump […]

Preamble With the exception of a puff in 2014~15, mostly and quickly reversed, China’s stock markets have been dull places since the GFC. For a full-throated roaring bull market to ever reestablish itself investors, both domestic and foreign, are going to have to buy bank stocks as these dominate major indices. Without such a move […]

We hear problems of overbuild and surplus capacity in China are pronounced in provincial conurbations. I had an opportunity to visit such a locale recently and what I found was a reality at odds with the stereotype and an economy surprising in terms of its dynamism. Nanning City    In theory Nanning (population 6.9m), being […]

Preamble In April I posed the rhetorical question ‘Dare We Be Bullish About China?’ [Dare We Be Bullish]. Then, I concluded, the answer was no. That note was a follow on to another written in August 2014 when economic indicators were pointing to a rapid deceleration of economic activity and some sort of hard economic […]

Preamble My investment thesis for China hasn’t changed much in recent years; for new readers it goes like this: China, fundamentally, is fine. Its financial institutions are, fundamentally, fine. Its political system is, fundamentally, fine. Its citizenry is, for the most part, happy with its lot and businessmen of all hues are presented with many […]

A copycat economy built on credit overly reliant on exports. Appalling corporate governance, unhelpful IR teams and hardly cheap stocks. Sound familiar? I’m not referring to China stocks today though. This was the received wisdom about Japanese stocks when I began my career in Asia in Japan in 1984; and we all know what happened […]

Summary Conclusion The world is always an uncertain place. China though presents more certainty about where it’s heading and how it wants to get there than any other major global economy. That investors are fearful of China presently, in the context of this surplus of certainty, seems perverse. Preamble The UK has just voted for […]

One of the sillier stories in recent weeks has been about the debt of the China Railway Corporation (CRC) being twice as large as Greece’s. The observation being irrelevant of course without some discussion of what’s on the other side of the balance sheet. In Greece’s case not a lot; we are and should be […]