China – Recent Market Volatility. By Caroline Shaw, Courtiers Fund Manager.
Today I am going to talk about China and recent stock market volatility. Some of you may remember that I visited China in 2014 and I came back having seen much over-investment, particularly in the infrastructure space and we concluded that we wouldn’t increase our exposure to China or Emerging Markets.
2015 was not a great year for Emerging Markets; Asia was down about 4%, while the US went up nearly 7%. China was up 17% that year – China ‘A’ Shares specifically listed and investing in domestic China. Very difficult to access and we chose not to. This year so far it’s been hugely volatile in China as the Chinese have introduced a circuit breaker designed to minimise market volatility, but it’s had the opposite effect, it was designed to stop the markets trading once there was a fall of 5% - just to holt them for 15 minutes and then to further stop them completely if the markets fell by 7%. This has been an utter disaster and they introduced it and withdrew it within the week. But China still props up its stock market and it’s not a place we want to be invested, in fact our exposure to China, which has by the way fallen 13% in this start of the year alone. Our exposure is very small. We access Asia, but we do not have much exposure to China at all. This has proved beneficial as our position has remained defensive this year.
In our Cautious Portfolio we have no exposure to China; no exposure to Asian Emerging Markets. In our Balanced Portfolio only around 2% and in our Growth Portfolio only around 4%.
We remain defensive and we are going to retain this defensive stance as we do not like to be investing in a market which is being propped up by the Government and is therefore unpredictable.
Caroline Shaw CFA, MEng (Hons), Dip PFS, IMC, Chartered MCSI
Head of Fund & Asset Management
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