Year of the Snake – good for investors?
This week marks the Chinese year of the Snake and Chinese communities around the world will spend the rest of the week celebrating.
But what does it all mean for businesses and investors. Hargreaves Lansdown’s Adrian Lowcock explains why now might be a good time to invest in China.
Reasons to invest in China
Recent economic indicators suggest now might be a good time to invest in China.
Exports and imports
Exports and imports surged in January 2013, up 25% and 28.8% respectively, compared to 2012 (Source: Reuters).
China has now surpassed the US as the world’s largest trading nation adding yet another accolade to its growing list.
China is also the world’s biggest energy user, biggest car market, largest exporter and holder of the largest foreign currency reserves.
A transforming economy
The country has started the transition from a manufacturing exporter to a more developed consumer economy, a process which was never likely to be smooth.
Restrictions on foreign companies directly investing in China are now slowly being lifted.
GDP Growth at 7.8%
Growth appears to have reached a bottom – In December the Chinese Academy of Social Sciences (CASS), one of the country’s top think tanks, predicted growth in 2013 could rise to 8%.
Growth in China remains some way above that seen in western economies, with the IMF predicting growth in the US to average 2% in 2013.
Avoiding a hard landing
It is worth noting that markets are forward looking and economic data shows early signs the Chinese have avoided a ‘hard’ landing which they are beginning to reflect in valuations.
However, investors are still cautious when it comes to China and are pricing in economic weakness and political uncertainty.
And there are still risks when investing in China – It lacks transparency and corporate governance remains some way behind the west.
However, whilst the region still has a large number of risks at these levels Chinese equities do look relatively attractive overall.
Investors should remember though, that whilst China maybe the second largest economy it is still an emerging market.