The past year has been seen as a turning point for China, with its economy growing below 8% and the country increasingly shifting from export-led to a domestic consumption–led economy. This transformation poses new risks and opportunities for investment professionals.
At the 66th CFA Institute Annual Conference, a distinguished panel chaired by Ng Kok Song, adviser and chair of global investments at Singapore’s sovereign wealth fund, the Government of Singapore Investment Corporation, discussed the implications of slower growth, rising debt, increasing wealth, and a volatile domestic equity market in China.
The panel included Jonathan Anderson, president of Emerging Advisors Group; John Wong, professional fellow and academic adviser at the East Asian Institute of the National University of Singapore (NUS); and Wu Shangzhi, chairman and managing partner of CDH Investments.
Anderson noted that debt figures coming out of China look “pretty insane.” Does this mean that China is facing a looming financial crisis? Wong of NUS noted that unlike the consumption-driven debt in the United States pre-global financial crisis, credit in China has been used to build infrastructure, which contributes to the economy over the long term.
As to the stock market, Anderson noted that price-to-earnings ratios have come down from about 50 times earnings in 2000 to 9 times earnings today, pointing to a bargain-hunting opportunity in Chinese equities.
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