Free Flow

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By all accounts, without gaining much media attention, large amounts of money are flowing into China and Hong Kong right now, particularly from large institutional investors in the US and Europe. I’ve heard this from friends in Hong Kong who are finding it hard to make sense of the contrast between the negative media reports they read over their breakfast to the large investment orders, usually placed by major American institutions, sitting on their desks by the time they arrive in the office.

Last week, the value of Chinese equities reached US$10 trillion for the first time since 2015 (an increase of US$3.3 trillion since March this year) and the currency rose 3.9% in the last quarter, the most in 12 years. It seems that the combination of new policies to encourage share trading, an easing of regulations to facilitate new listings, the increase in MSCI weightings towards China A shares, and a strengthening of the Chinese yuan are all having an impact in the rise of share values across the board.

But most importantly, according to the International Monetary Fund (IMF), China is the only economy in the world showing positive GDP growth this year (1.9% growth predicted for 2020) with a faster-than-expected recovery to 8.2% GDP growth in 2021.

China will soon become the largest economy in the world yet represents less than 0.5% of most investment portfolios. Large institutional investors are starting to redress the balance. We should all do the same.

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