Username
Password
Forget Password?
  1. Indices
  2. Commodities
  3. Currencies
Straits Times 3,170.77 +0.88 +0.03%
Hang Seng 27,288.09 -65.84 -0.24%
Dow Jones 25,585.69 +95.19 +0.37%
Shanghai Composite 2,892.38 +39.38 +1.38%
Louis Wong: 3 Reasons China is Attractive Again; Buy Energy
Aspire, Thought Leaders | 16 October 2015
By: Chen Xushuang
Articles (26) Profile

The Chinese stock market has faced a tumultuous second half—the stock market bubble was popped in June, causing A-shares value to plunge by a third within a month. Major aftershocks were seen in July and August, as the Shanghai stock market continued to fall despite government intervention.

Renowned fund manager and financial analyst Louis Wong explained that the bubble burst in June was a result of over-speculation leading to an overheated and overleveraged market.

Source: qz.com

He said that the second plunge, on the other hand, was due to China’s slowing economic growth. An indication of contraction is China’s manufacturing purchasing managers’ index (PMI) slipping to below 50, the weakest level since August 2012.

However, Louis also sees opportunities for investors, as China and Hong Kong stocks become “attractive in value” again. He also sees a possibility of return to the bull in Q4, as the Chinese government continues with easing policies and measures to stimulate the economy. Here are three keywords that he has highlighted for investors.

1.       “Micro-stimulus”

Louis expects more micro-stimulative measures from the Chinese government. The term “micro-stimulus”, means stimulus in smaller scale, in contrast to large scale stimulative measures such as China’s 4-trillion yuan stimulus package introduced in 2008-2009. This is because the government has learnt the lesson that the latter has brought about negative repercussions such as excess capacity (in which demand for products is less than potential supply) and heightened inflation, said Louis.

In comparison, micro-stimulative measures tend to be more focused on particular industries, or even particular fields within the industry. Louis cited the example of China cutting sales tax on small cars by half to revive growth in its automobile market. Similarly, when it comes to the real-estate sector, China’s central bank has reduced the minimum down-payment required for first-time home buyers in most cities, from 30 percent to 25 percent.

Louis Wong says that these measures are capable of driving up fixed asset investment and domestic consumption, which he sees as two main forces behind China’s economic growth. Thus he feels that investors need not be too pessimistic because of China’s currently weak imports and exports.

2.      “13-5”

Source: globe-net.com

“13-5” here refers to the 13th 5-year plan (2016-2020), which would play an important role in shaping China’s future economic growth. Higher focus is placed on domestic consumption, high technology, and innovation, as China seeks to reduce its dependence on exports and state-led investment growth.

Hot themes and most-targeted industries covered by “13-5” include ageing care, nuclear energy, information economy, photovoltaics (solar energy), and environmental protection.

Apart from that, Louis also noted that one of the targets of “13-5” is to narrow the gap between the rich and the poor. Thus he thinks that certain policies might be slanted towards building the economy in the more remote and underdeveloped areas, as well as getting people to migrate to and work in these places.

“In such a case, transport and construction-related sectors will also likely benefit,” he said.

3.       Energy

Out of the abovementioned sectors, Louis sees a lot of potential in the energy sector, and foresees that Chinese government will put a high focus on promoting the growth of renewable energy, nuclear energy, and clean energy, etc. 

The 13th five-year-plan proposes the construction of 6-8 new nuclear plants each year. At such a rate, China would have more than 110 working nuclear plants by 2030, exceeding the number of nuclear plants in the US. Photovoltaics subsidies will also continue at least for the next 8-10 years.

Investors’ Takeaway Summarised

  1. Expect stimulants in small doses, and policies to be industry-specific.
  2. Keep up with news on China’s 13th five year plan to get a hint of which sectors will benefit.
  3. Energy looks promising because there is still much potential for development in this field.

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!

Talk to our speakers Face-to-Face!

 

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.


Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

All Rights Reserved. Pioneers & Leaders (Publishers) Pte Ltd. Best viewed with Mozilla Firefox 3.5 and above.