China

The current EM weakness is not yet a full-blown crisis but, if it does become one, it will drag down developed economies too.

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What worked, what didn’t; what you need to consider for investing in Emerging Markets this year.

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There are signs the domestic Chinese market may be more accessible to global investors sooner than most think. We explore the implications of these potential changes.

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We find hidden opportunities in Equipment & Services Providers, Coal and Natural Gas. We consider these themes longer term holdings instead of short-term plays

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We examine Emerging Markets from both the top-down and bottom-up perspectives as we try to identify where to move and what to expect. We check in on two successful EM thematic group ideas as well.

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For more than two years we’ve discussed the supply-side risks to commodity producers stemming from capacity built during the manic “Third Act” of last decade’s Three Act Play in commodities. Commodity-oriented equities have indeed underperformed since 2011, but to date, most pundits have laid blame squarely on the demand side.

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Commodity producers seem to believe that last decade’s commodity boom is set to repeat. This belief itself probably ensures that it won’t.

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Is it time to reverse the “long U.S. consumer/short China” trade?

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Leuthold’s Jun Zhu provides an update on China’s latest Five-Year Plan and how it may affect the Pharmaceutical industry in China. 

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Interesting development coming out of China recently that is getting little attention. The Chinese government is planning to allow ETFs with Hong Kong listed companies as underlying securities to be traded on the Shanghai and Shenzhen Exchanges.

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Jun Zhu examines Chinese companies with Variable Interest Entity (VIE) structures. Investors shouldn’t be completely turned off by concerns over these structures, but it would be wise to heed the risks.

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The latest bull market has now essentially matched the returns for all bull market recoveries dating back to 1900. Remarkably, it has accomplished this in only half the normal time frame.

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Analysts typically focus on demand for products and rarely look at the supply side. Consumer Discretionary companies were rewarded for their pessimistic positioning with better pricing and higher margins. 

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Jun Zhu makes a compelling case for focusing China equity exposure on consumer stocks. Increases in bank “Required Reserves” mandated by China government will have greater impact on Infrastructure stocks, while consumerism is still being supported and encouraged.

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While U.S. banks are still seeing loan levels declining, China has seen a 24% increase in bank loans since the end of 2008. Assuming these loans are actually employed to build infrastructure, it would seem the recovery may be getting underway.

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Looking at alternative ways to play China. See this month’s list of H-shares trading in U.S. markets.

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In mid May, 4% of assets were shifted from U.S. stocks to Emerging Market holdings, buying a package of individual Asian stocks. This same package is being used to boost exposure to 70% in early June.

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A look at the perils with Chinese A Shares. Concern has been raised about China A Shares because they are seeing significant increases in their share float, due to government releasing restricted shares to the public.

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A brief description of the differences among these Chinese market segments and comparisons of major funds offering exposure to the Chinese stock market. 

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A popular buzz word in recent months is “decoupling”, often used in building a case for investing in fast growing foreign stock markets even though the U.S. economy is entering a phase of minimal economic growth or recession.

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