Bamboo scaffolding

12 January 2018

Indeed, this was a return visit from the year before to a place that is dynamic, thriving and, in my opinion, in its infancy of future progress. It was ironic to see helicopters taxi-ing onto skyscrapers, as buildings to either side were clad in bamboo scaffolding as they started their leap from the ground into the sky to join their neighbours.

Development and progress is clear to see (even over the last year) with, from what I could observe, the younger demographic holding significant wealth, and of course innovative opportunity with it. Respect seems abundant, along with determined order, and a desire to move forward. We have suggested that while the world has economically been 'looking west' in the last two or so years, the east looks to be preparing for its return as an economic powerhouse, as it was some five years ago. This future prospect is not guaranteed, but may be an additional opportunity in the future.

I have requested some comment from Steve Williams of Cormorant Capital Strategies on the position and prospects of China, as an example, into the future and he notes:

I have begun to focus, almost exclusively, on the Purchasing Managers' Index (PMI) surveys. I'm comforted if I see the manufacturing PMI a little above 50 and less comfortable if I see a reading lower than 49 or higher than, say, 54. (Remember that the PMI surveys take the form of a 'diffusion index' varying around the 50 mark. Anything above 50 is indicative of expansion and anything below 50 is indicative of contraction).
What I am looking for is a gradual resolution to the problem of overcapacity in China's heavy industry; I worry that a sharp decline would inspire a great many lost jobs and that a sharp increase will exacerbate overcapacity. At the same time, I want to see the services PMI as high as possible and certainly not less than 50. That way I am reassured that we will, one day, see a healthier balance between external and internal demand and between the manufacturing and services sectors.
Earlier this year, I was nervous that the trend in both the manufacturing and services indexes was headed downward from the higher end of the range toward the lower. The trend was more pronounced in the private Caixin series than it was in the official series but both were cause for concern. And while that disparity still exists today – larger manufacturers, better reflected in the official index, are still performing stronger than smaller manufacturers – I can report on further improvements.

Past performance is not a guarantee of future performance. Fund values can fall as well as rise and currency volatility may also affect fund values.

We still see investment into the Far East as higher investment risk and not for all. However, as part of a balanced asset allocation process, dependent on risk appetite, this may be an area worthy of discussion for the future. We recommend that investments should be reviewed regularly to ensure that they continue to meet your needs.

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS


CFP Chartered FCSI

Chartered Financial Planner

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