International Overweight China

Discussion in 'Shares & Funds' started by Zenith Chaos, 1st Jul, 2020.

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  1. Zenith Chaos

    Zenith Chaos Well-Known Member

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    china gold fraud: China's biggest gold fraud, 4% of its reserves may be fake: Report - The Economic Times

    Alhough investing in China makes logical sense there are always underlying risks with a country where corruption and lack of transparency is an inherent part of society.

    My point: before overweighting China in an asset allocation an investor needs to understand the risks. Similar risks may apply to other countries but China, as possible the next superpower, is such a monolithic and expanding economy that it is probably more relevant.

    + this may be deemed racist or discriminatory but this is not my intention.
     
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  2. Gen-Y

    Gen-Y Well-Known Member

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    Fraud is everywhere until it is discover by someone.
    There could be some truth to that article, but I am just getting older and very cynical about it all.
    Where there are more concentration of power - fraud and corruption is also higher and larger.

    Doesn't take a genius to figure it out, unless you are truly stupid and ignorant.
     
  3. Zenith Chaos

    Zenith Chaos Well-Known Member

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    Not sure if you're saying:
    1. The article is an unsubstantiated pot shot at China
    2. China is corrupt but everyone realises that corruption is ubiquitous and
      1. Have already considered it in their risk management
      2. Don't need to consider it
     
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  4. Omnidragon

    Omnidragon Well-Known Member

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    It's just prejudice.

    Every country has corruption (eg Joh whatshisname, Brian Burke, ALP Vic minister branch stacking, Obeid), yet the number of times I hear people talk about Chinese corruption when they haven't even lived/been there, especially under the new government from the past few years, makes me question the relevance of these comments. As for transparency, again I find that questionable. Tencent is now suing Lao Gan Ma in court and it's well publicised... this isn't some backroom dealing stuff.

    You want to talk about fraud. What about Wirecard in Germany? 2 billion Euros just vanished these few weeks.

    Truth is if you invested into the major Chinese ADRs, would've probably made a killing these few years.
     
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  5. Zenith Chaos

    Zenith Chaos Well-Known Member

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    Germany, Joh Bjelke-Petersen and other corruption is irrelevant, as is the short term success of a portion of the Chinese market.

    I have lived temporarily in China and a direct relative lived there for 4 years in a diplomatic capacity. Once again, this is totally irrelevant.

    What is relevant is the evidence of China's lack of transparency. Covid19 is a perfect recent example of extremely important information that should have been shared. It is only logical that if they don't share this type of information then they may not share other important information.

    I personally will not overweight or underweight China.
     
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  6. Ross36

    Ross36 Well-Known Member

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    I like the "idea" of China as a diversifier should USA lose its position of power and those two go into a more blatant political/military war. But the reality I think is that China would just close its market one day to overseas investors and take all my money. It has happened before and will happen again. Having spent time in China there's much more of an American presence via chains like restaurants, clothing, technology etc. Than I expected. Large cap USA stocks is therefore enough china exposure for me.
     
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  7. Ariyahn2011

    Ariyahn2011 Well-Known Member

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    I never considered that risk. I reckon VAS + IVV is pretty good diversification. Even if America lost its number one spot one day, I think you still get diversification to other countries as you pointed out. Every time I go to India I see America (McDonalds, AMD, Nvidia and so on). American population is 300+ million and I believe this will continue to rise (400+ million).
     
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  8. Omnidragon

    Omnidragon Well-Known Member

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    Well that's a personal investment decision.

    I'm very happy to be invested in the likes of Netease, Meituan Dianping, Tencent, BYD. Certainly over buying some of the all time favourites on this on this forum
     
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  9. Ross36

    Ross36 Well-Known Member

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    Sure is - each to their own. I think there's a very good chance china will outperform the USA market over the next few years. And I do own market weight in China. But I personally wouldn't overweight it because of the risk of one day losing everything, and my plan is buy and never sell. A future where the USA closes its stock exchange to me is much less believable so I happily invest heavily there - but again market weight only.
     
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  10. George Smiley

    George Smiley Well-Known Member

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    I'd imagine things would have to be pretty downright severe for this to happen afgain given how much money is flowing into Chinese equities. Regardless of how opaque Chinese markets are, such a move would terrify international investors and funds investing in China.
     
  11. Omnidragon

    Omnidragon Well-Known Member

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    It’s funny how so many in the west seem to think that China is some Martian state run by goblins who are hell bent on destroying their own society by doing things like confiscating people’s properties or closing down the sharemarket forever. But ok
     
  12. Ross36

    Ross36 Well-Known Member

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    Read your history. China has closed their share market many times before. As recently as 1995 their leader said he would happily close it again if he didn't like how it looked. Far too socialist for me. The returns are likely to be higher because the risks are higher. It doesn't suit me but I am conservative.
     
  13. Omnidragon

    Omnidragon Well-Known Member

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    1995 from 25 years ago? Don’t see what the relevance is. Is that leader still alive? Australia had white Australian policy too in 1970s.
     
  14. Noobieboy

    Noobieboy Well-Known Member

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    If my neighbors are corrupt do I have to be corrupted? Let’s stop saying he had it too and he had it too. This thread is about China, no need to get defensive.

    I don’t believe leaders of any country, be that Russia, China or America would want to harm their own population. But I also believe that in countries like China it is very easy to “influence” the law and powers that are supposed to be independent.

    Sufficient to see what happens every time tension flares up between China and another country. Suddenly customs in China find that imports are non compliant or there is another excuse to economically harm the opponent.

    We are not children. Politics need to be balanced and independent of executive. Tensions flare up and go. The difference between corrupt and non corrupt nations is when there is an unbalanced leader they have much less power to influence every day life. China doesn’t have that.

    In regards to investment. I think China still has good investment value. However, I would be careful to go overweight. I treat it as a speculative buy.

    I also think China will eventually follow Japanese path. It will grow slower and taper off. But it might, just might, become more open and balanced.
     
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  15. Burgs

    Burgs Well-Known Member

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  16. Zenith Chaos

    Zenith Chaos Well-Known Member

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    This is another interesting documentary

    The China Hustle - Wikipedia.

    Investing in China is an interesting exercise in risk management. It is growing and has great potential in comparison to other markets but there is that possibility of the rug being pulled out from under you. So, good upside, big downside, you'd classify this as a higher risk play unless you had additional information about the market to guarantee that your decision making isn't flawed based on a lack of critical information.
     
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  17. qak

    qak Well-Known Member

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  18. Ross36

    Ross36 Well-Known Member

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    Well said. As a long (infinite?) term buy and hold investor I need to be confident I won't panic sell. If the ASX or USA markets drop 50% I'd be nervous but also buying as I'd be confident that it would bounce back. Being heavily in china though I'd be freaking out about losing it all permanently and might buckle and sell it all. That's just me though, each to their own. Completely different story for day traders
     
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  19. Ariyahn2011

    Ariyahn2011 Well-Known Member

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    I'd personally be more comfortable purchasing shares in a democratic country such as India & Indonesia . I know their not perfect, but as far as I know, their people can vote their government out....
    Do competitive index funds exist for countries such as India and Indonesia? I know there are a couple of Indian ones but I believe their admin fees are pretty high.