You think these markets are expensive? China equities aren't there?
Well, China in particular, they're not really expensive, right.
When you look at it purely from a price to earnings as well as a price to book
basis is one of the most inexpensive, you know, in the world.
The fact is, is that there is still a lot of overall investor sentiment, which
is still fairly weak. Both onshore, domestically as well as
overseas. I was trying a couple of weeks ago, you
know, being with some clients and also some of the strategies and their
sentiment is very similar. The fact is, is that they're waiting for
specific key data points, which is going to lead to sort of an improvement and
maybe more people want to get back into the market.
There's a lot of money on the sidelines in China.
And the fact is, is that a lot of these individual or specifically institutional
investors in China are really waiting. Every analyst that we come on here
almost says overweight fixed income. What is the equity case now?
Yeah, I mean, you've got to be very supportive, especially when it comes to
China. Yeah.
Be careful specifically of where the opportunities are going to be,
especially over the past six months or so when you're investing in China.
So we have performed very well. You know, there's been a push towards
value equities. There's been a push towards higher
dividend paying equities. You see that particular market segment
have done very well. Specifically, when you focus on more
policy related, more the growth related, the new economy sectors, these sectors
are still kind of a wait and see approach.
And this is one of the issues that we've been seeing within China.
And that's why investors are really so waiting for the right opportunistic time
to coming up like, you know, so I earlier mentioned with one of your
guests saying that, you know, both economic sword manufacturing data.
The demand is really not there. There's a lot of excess inventory.
And the fact is, is that with this excess inventory is going to take time
to deplete. One of the figures and one of the sort
of I was a key economic reason is to look at is PPA.
CPI is still relatively weak in China. When PPA starts to pick up, then
potentially you will start to see more manufacturing activity starting to
happen. So we think that's going to be a key
focus. And one key metric to look at and
curiously, PBR is not a foretelling of CPI.
Your point is and it's just in the second half we get this regard.
But I mean, Chinese equities are just at the moment decoupled as a market from
the rest of what you can see with the division, with A and H as Canadian.
You don't get the interest from money managers.
And this is what is usually comes a point when they can't avoid value, which
is screaming to buying. Yeah, you're absolutely right.
And again, from our bases and our key point, we feel that onshore there's
going to be more opportunities. In particular, when you look at the
amount of overseas investors within the onshore market is very light overall
exposure for on for offshore related investors within or investing in China.
It's roughly about 3 to 4 percent. When you look at amount of overseas.
How much was it earlier or earlier? Maybe from a year ago?
It was less about maybe one or two weeks of it.
But again, it was about 1 percent. So it has gone up a bit.
But if you look at Hong Kong shares or ADR is there's roughly about 20 percent
foreign investor exposure. So you have a lot of investors who are
ready in Hong Kong or within the 80 yards, but within a shares, it's a very
small portion. What's the trigger for for the offshore
market? You mentioned people are waiting for
catalysts. Is it the Fed?
Is it. Is it something outside China
potentially? The fact is, is that maybe once you
start to have some of the capital is flowing out of the US, let's say, for
instance, if the dollar starts to weaken further.
Right. We're ready down to about 1 to 1 on the
dollar index and potentially that we can further.
Will you potentially start to have some capital maybe be reallocated back into
Asia? Right.
We're seeing a lot of investors still focusing on dollar investments because
the fact is, is that dollar has been strong.
But the fact is, is that if let's say the Fed is or, you know, at a point
where they get start raising interest rates and the dollar starts to weaken,
then you could potentially have some of this assets being reallocated.
And one of those instances is if they're looking for opportunities, looking for
value of China is one of those places where investors might look, you can't be
underweight China, you know, sort of for exam period time.
Let's say if China does start to outperform, then you're gonna start to
see a lot of investors starting to close some of those underweight positions,
similar to what we saw in October and November periods here in Hong Kong.
Yeah, a lot of the hedge funds specifically at that time who were
shorting China exclusively or extensively, then there was a lot of
short covering. Now in this particular one, they left
fairly quickly. Did they?
Did they did. And for a lot of the long only
investors, though, especially the ones in the US specifically for, let's say,
amongst global equities or E.M. equities, they're still under weighting
China quite a bit. So any sort of momentum within the
markets, you could expect to see some of those underweight positions to gradually
reduce.