market-pulse-3-investments-goodbody-wide-feb21

Is it time to increase exposure to Asia?

Written by Frank Murray, Research Analyst

30 August 2021

In this week’s Market Pulse, Research Analyst Frank Murray discusses the growth concerns emanating from policy changes in China and whether this market weakness might present a buying opportunity.

  • The first thing to understand is President Xi’s policy goal of common prosperity - he wants to reduce inequality across China. He’s also extremely concerned about the low birth rate in the country - despite reversing that one child policy in 2016, the birth rate has continued to move lower. Both of these issues are linked and they also have serious implications for the private education sector and the internet sector.
  • The net effect is a less friendly investment environment - internet stocks will face increased regulation, higher costs, lower returns on invested capital and for the companies that are not focused on the areas that China views as strategically important, it means making more investment in these areas or if not, then making donations to state-backed initiatives that are focused on these areas.
  • We’ll be watching the region closely but for the time-being we’re happy to stick with our position given the heightened uncertainty, regarding earnings, valuation and sentiment
Tags
Contact Us
Warning: Nothing presented on this website constitutes investment advice as it does not take into account the investment objectives, knowledge and experience or financial situation of any person. You should not act on it in any way and are advised to obtain professional advice suitable to your own individual circumstances. The value of your investment may go down as well as up. You may lose some or all of the money you invest. Past performance should not be taken as an indication or guarantee of future performance; neither should simulated performance. The value of securities may be subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.