John Redwood, chairman of the investment committee at Charles Stanley Pan Asset, has written an interesting piece for the Financial Times noting how investors who backed China and India over the past ten years made much more money than investors in the main advanced markets while over the past two years it has been much better to back the higher income countries. On the subject of China though, Redwood makes this interesting observation after talking about how critical Western journalists are dutifully going to China to report on all the supposed “problems” there:
To me it feels more like a canny new chief executive wishing to lower expectations, make some provisions and explain the weaknesses of his inheritance that need to be improved, than the beginning of a large crash. I have been amused to see how uncritically some journalists and commentators have accepted the official spin and added to it their own gloom and doom, without asking themselves why the Chinese regime wishes people to know there are problems.
However, Redwood latter added that all the reports he receives from people who know China and its government say “the administration is fully in charge, keen to reform China in a market-oriented direction and well aware of the need to prevent output growth and job creation falling too far from past levels.” He then wrote:
On all the usual figures investors look at – the relationship of share prices to earnings, the book value compared to share price, and the future income potential, Chinese shares look cheap. The government wishes to curb property excess, force a more prudent approach by fringe financial institutions, and stop local authorities indulging themselves too much. In moderation, that is a good agenda.
To read the whole article, Re-emerging markets offer opportunities, go to the website of the Financial Times.
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