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Kevin Gin: China’s 7% Growth Is Still Decent
Aspire, Thought Leaders | 05 June 2015
By: Vance Wong
Articles (74) Profile

Why China? Because China is a rapidly growing country within our timezone. We would lose out if we do not participate in the growth of China. We have the opportunity to benefit from another country within our timezone, and we share the same language and similar culture.

Equipped with rich experiences living in China and visiting many cities and states, analysing their economic statuses and growth, Kevin Gin shared valuable advice to investors interested in Chinese stocks.

China Real Estate Doing Well

While many people outside of China feel that there is a glut in its real estate sector, Kevin Gin begs to differ. He mentioned that he has been to cities where real estate gluts were said to be. He would typically wait about three to four years before flying over and he realised that these sentiments were not true.

From his personal experience, when the Chinese real estate developers complete a project, they do not include proper renovation that would allow residents to move in right away. As such, this could be one of the reasons why people would assume that there is a lack of demand for real estate properties.

China’s 7% Growth Is Pretty Good

Kevin feels that the real estate investment returns have performed in line with China’s economic growth. However, it is apparent that the Shanghai and Shenzhen Stock Exchanges did not reflect the economic growth all that well. Furthermore, the current seven percent annual growth is actually a pretty good number.

Just because the Western regions have expressed their concerns about China’s slowing growth, it does not mean that China is not doing well. China merely missed the expectations of others but is by no means in a crisis.

Looking at the Shanghai Shenzhen CSI 300 (CSI300), Kevin concludes that the recent run up was mainly policy-driven. The Chinese government are increasingly liberalising and allowing global investors to speculate on listed Chinese companies, thereby allowing more funds to flow into the country.

Financials Biggest Beneficiary Of Rate Cuts

Source: WSJ

Other than liberalisation policies employed by the government, there has been a first ever interest cut in November last year, since 2012. Two more cuts followed, the latest being in May. To Kevin, this is good news for financials, specifically the banks.

Lower interest rates mean that banks’ loan portfolios have a lower likelihood of defaulting. Kevin added that this would also increase the values of assets in general, benefiting both their clients and themselves. These were the reasons why the CSI300 and A50 were major outperformers in the China space.

The technology sector has also been flourishing ever since Alibaba got listed and was considered a breakthrough for the Chinese tech market. As China is an emerging market, technological advances play a huge part in growth, making tech stocks exceptionally attractive at the moment.

In a nutshell, if you are a passive investor, having a position in the CSI300 or A50 indices would provide you with decent returns. On the other hand, if you are looking at specific sectors or stocks, Kevin thinks that financials and tech companies are areas you would want to look into.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.

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