Page 51 - DIY Investor Magazine | Issue 36

How do global investors survive the challenging environment? I argue you survive by identifying long-term durable themes that allow you to ride out the roller coaster swings to the market, where almost every prediction can be proven right or wrong.
You want solid investment themes, which allow you to hold
your conviction, preserve your wealth, and pass it from one generation to another. You must figure out your preferred theme, and avoid buying high and selling low.
Themes include energy, food, key commodities, including copper and lithium, and defence stocks in an increasingly uncertain world.
One of my favourites is Chinese stocks and bonds as it has become too big to ignore; I believe the key to sustainable investing, is to find a sustainable society that can withstand this era of social, monetary and financial disorder.
China has a foundation of sustainability and a large and fast growing middle class of 400m people - larger than the population of the US.
It is likely to number 800m by the end of the decade – a very solid foundation of an inclusive society, which allows the country to provide its own huge domestic market for innovation, manufacturing, and distribution.
It is a self-contained continental economy providing a high chance of sustainability which, in my view, is key to wealth preservation.
There are very significant changes in terms of how people save and invest, creating the world’s largest pool of savings. The Chinese 25 year addiction to buying property faded away since COVID; household wealth used to be more than 50% represented by just this one asset class, whereas real estate today is more like 37%.
Meantime, the percentage of household assets allocated to capital market products, to professionally managed funds, has risen to 13% from just above zero a generation ago.
The Chinese have discovered the value of investing in capital markets, relocating savings from a property market that had become an unproductive bubble. 80% of households in the
cities already own one or more properties, so, China wants to redirect savings to productive investments, especially innovation, green energy, and manufacturing, and it is happening.
We are excited because it means there is a lot of new money from the Chinese mainland waiting to enter the stock market and support share prices and valuations; at the same time, there’s a supply of new ideas and new initiatives.
Chinese companies are choosing to IPO in Shanghai, Shenzhen and Beijing - the mainland domestic markets – which assures a lot of new opportunities for a public investing their savings.
So overall, we are quite confident to say that a new cycle has started in terms of the economic cycle, structural changes, valuations, sentiment and the overall global economy. I think China is entering a new era; it is the turn of Chinese stocks to shine.
Dato’ Seri CHEAH Cheng Hye is Co-Chairman and Co-Chief Investment Officer at Value Partners Group. See Value Partners Market Outlook 2023 on YouTube
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Dec 2022
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