Why you should avoid investing in China for now – MoneyWeek

Assetsundermanagementareshrinking,distributioncostsarerisingandnewcompetitorshavebeenfloodingintothemarket。

Theycouldn’thavechosenaworsetime,giventheCSI300Index,whichlists300A-sharesinShanghaiandShenzen,isdown15%sofarthisyearand23%overthelast24months。

Inshort,Chinacurrentlypresents“numerousriskstoforeignfundmanagementfirms”。

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Investinginfunds:whywepreferinvestmenttruststounittrusts。



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Asforindividualstocks,SamSubramanianonMarketwatch。

compointsoutwhyreturnshavegenerallybeensopoordespitethe316%growthinChina’seconomyoverthelastdecade。

Forastart,Chinesefirmshaveregularlyoverestimatedtheprofitgrowththeycoulddeliver。

Thishasbeencompoundedbypoorcorporategovernanceandaccounting(somethingBoltonhasalsoacknowledged)。

Morerecently,thebigproblemhasbeeninflation。

China’scentralbankhasbeenraisingratestotrytocombatrisingprices,butthathasmadeithardforcompaniestogetloans–anecdotalevidencesuggeststhateventheunofficialgreymarketforloansisdryingup。

Andjustforgoodmeasure,China’sexportstoEuropearenowbeinghammeredbytheeurozonecrisis。

Theseissuesmaynotresultina2008-stylecrashforChina,buttheywilltaketimetoresolve。

SoregardlessofhowbullishyouareonChina’slong-termoutlook,we’dbewaryofpilinginnow。

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