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DAR Wong: Stay Away from Chinese Equities for Now
Aspire, Thought Leaders | 28 September 2015
By: Chen Xushuang
Articles (26) Profile

China’s economic slowdown has sent stock markets all over the world into panic, and it was this uncertainty that had persuaded the US Federal reserve to keep interest rates on hold. To make matters even more worrying, China has also devalued its currency in August, which made it around 2% weaker against the US dollar. Why is this so and what does this mean to investors? To answer these questions, we have interviewed Mr DAR Wong, active market trader, registered fund manager, educator and author for his insights. Below is a slightly edited version of the interview.

Q: Economists say that China’s economy is facing a major slowdown. What do you think?

A: I think China’s slowed GDP growth is not necessary a bad thing, neither is it surprising. From a macro point of view, not just China, but the whole world is facing a shrinking economy. Thus it would be impossible for a single country to achieve substantial growth just by itself. The important thing is to see what the country’s government does to alleviate the problem of economic slowdown, curb unemployment, and make it easier for Small Medium Enterprises to recover and profit.

Q. Many analysts also think that China’s devaluation of the Renminbi (RMB) has severely affected the world stock market. What is your view on this?

A: Again, I don’t think it has to be a bad thing. I think China is devaluing the RMB in response to US’ announcements of rate hike. If China had not taken this step, it would become a “sitting duck” when the US raises interest rates and strengthens the dollar, which would result in a major crash in value (relative to the USD) for currencies in SEA. This is on top of the fact that the SEA economy already appears to be shrinking. I think the Chinese government has considered this as well, and thus I see the devaluation of RMB as its form of “retreat in order to advance” (to boost exports and to keep the RMB more in line with trading partners’ currencies).

Investors’ Takeaway

Q. Given the current situation, what is your advice for investors?

A: Actually, currency trading is a financial instrument that comes with risks. It is high in volatility, meaning that one can make profits quickly, but also lose money quickly too. Therefore risk control is important, and investors should understand their own risk capacity before entering the market. Investors should also be sure of the type of trading they engage in—whether it is day trading, medium term trading, or long term trading.

While the Shanghai Stock Exchange (SSE) Composite Index has fallen by approximately 41% from its June high, I think that it would surely recover, from a macro perspective. However, the key question is when and how long it would take. The Chinese government has deliberately hit the brakes of China’s economic growth, but on the other hand, it has also introduced measures hoping to stimulate the stock market to rebound and to reduce speculative action on the market. Such measures include cracking down on illegal share sales and controlling excessive leveraging. Typically, after speculative actions have been reduced, some long term investors will start to enter the market, but this is not a phenomenon of recovery we can expect to see in just one or two months. I think that it would at least take six months to a year for China to recover, and to see the various economic statistics stabilise. Stocks will only start to rise after that happens. Thus conclusively speaking, it takes time.

Still worried about when and how much would the US Federal Reserve hike interest rates? Do you have burning questions that you want to ask regarding the China economic slowdown and SHCOMP nosedive in June? Are you confused if any of the external factors from other countries in Asia will affect your Singapore stocks portfolio?

Catch renowned investors and speakers with rich experience in the stock markets, who have had witnessed multiple stock market crashes and global recessions over the years at Shares Investment Conference 2015!

Speaker profiles

1. Dr Chan Yan Chong, a renowned investor with more than 25 years of experience and the MBA programme director & associate professor of business school at the City University of Hong Kong.

2. Kevin Gin (CFA), the Founder and Principal of Alpha Capital. He was the former COO for CITIC Securities, Head of Singapore and Regional Real Estate Research for Kleinwort Benson Securities Asia (now part of Credit Suisse) and Head of Greater China Property Research with Yuanta Securities (Hong Kong)

3. Louis Wong, one of the most experienced fund managers in Hong Kong. He has over 25-years of solid experience and track record in the financial market. He was awarded Best Financial Analyst for 3 years by the Putonghua Channel of Radio Television Hong Kong and is also a part-time instructor of several investment courses in various Hong Kong universities.

4. Daniel Loh, an investment coach that specialises in equities and derivatives trading, he appears regularly on local TV financial programmes like “Good morning Singapore” and “Hello Singapore”.

As a Communications Studies graduate specialising in journalism, Xushuang is keen to observe and explore issues that readers want to know more about, and to deliver quality content through engaging writing.

Please click here for more information about this author.

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