Don’t fight Beijing

Chief Investment Officer and founder of Aitken Investment Management
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Key points

  • The Hang Seng China Enterprises Index or HSCEI Index, if you believe the earnings forecasts, trades on 7.5x FY16 and a dividend yield of 4.2%.
  • Obviously, Chinese GDP growth isn’t “7%”. It is probably growing at plus 4% per annum, which is still the fastest GDP growth rate in the world.
  • Australian resource stocks will probably remain volatile trading instruments and it is best to approach them as trading stocks inside well-established lower trading ranges. BHP seems to consistently hold the $25.00 level, for example.

Clearly, there has been a complete investor capitulation in all things China facing. From Chinese equities, through to Macau casinos, luxury goods stocks, commodities, commodity currencies and commodity equities, it has been a complete wipe out. There has been absolutely nowhere to hide.

Investors have shoulders slumped and losses have been large. The financial press and analyst community have become universally bearish, while hedge fund short positions are now very crowded. It seems even people who once liked China now hate it because they have lost money.

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