In this short video, Pruksa Iamthongthong explains how and why China’s A share onshore market has challenged past perceptions in 2020 to date.
So how has China A performed so far in the year of 2020? We all thought that it would be a very volatile year. But actually, China A onshore market has challenged past perceptions.
This year, it has lower volatility, it has lower drawdown when you compare to the developed market. And there are five reasons as to why we think this is the case.
The first is that China is in a better shape. If you look at how China has been handling Covid-19 they are the first in and first out. And things are pretty much back to normal in China.
If you look at industrial production in China, it is back to a pre-Covid level. And even if consumer spending is not back to pre-Covid level today, we are seeing strong signs of recovery within consumption in China and luxury consumption or premiumization trend in China has been very much intact.
The second would be in terms of self-reliance. China is no longer the economy that is dependent on export driven and investment led economy like 10 to 15 years ago. They are very much driven by domestic consumption and services today.
And this is very much again, very important given what's going on in the external environment and the uncertainty it brings. So self-reliance in China has made Chinese economy a lot more resilient this year.
The third would be: insulated. China's domestic onshore market, like its economy is more insulated because it's driven more by domestic factors. And this is very much illustrated by the strength of the market that we see today.
The fourth would be in terms of stimulus, China economy. And the way that the Chinese have handled this have been a lot more disciplined than the rest of the world. And they have chosen to keep that gunpowder dry.
What this means is that should things go down south from here, there is a lot more room for the Chinese government to do a lot more in terms of fiscal and monetary policies. And this is the buffer or the safety net, if you like, for us if things were to go down south, and the last would be in terms of consumption.
This is the long-term thesis of investing in China. It doesn't change it did not change during the Covid-19 situation. And we believe that the long term premiumization trend and the growth of domestic consumption in China will continue to be very structural.
As the Chinese start to gain more wealth and buy more insurance products, wealth management products and luxury goods.