China Still Surging !!!!

purch

There is the argument that China is different and is a unique case

Not just China...

There is a danger in trying to make the new rapidly emerging markets, with so many Billions of people ( Consumers...Savers...Spenders ) fit into pre-conceived and determined patterns. Just because the mature markets in the already Industrialised world behave in a certain manner, doesn't mean that those in these 'new' markets will behave in a similar fashion.

There will be 'panics' as witnessed in the Sensex, ( which is probably more of a Currency issue than Stock market issue ) but also times of what we may see as irrational optimism.

These markets will witness 5-10% falls for often insignificant reasons but overall there is a wall of money out there and the medium term trend is upwards

wombat42_2

Aegis wrote: »

There may well be this argument, but it didn't stop you jumping ship as soon as the Hang Seng took a 2-3% fall in a couple of days, did it?

It fell 5% in 2 days . I wouldnt have minded except other markets didnt fall on those days and also there was nervousness because China was just finishing a week long holiday - talk of the start of a possible correction

Unlike most other counties China, doesnt have credit crunch or overvalued property issues. You could argue that investing in the UK is more risky than China. Can you persuade me that investing in the UK is safer than China ?

munk

I'm with Aegis on this, wombat you seemed to jump ship rather quickly at the first flicker of a downturn and in the event probably missed out on a bounce in the following few days (threadneedle did well on the back of a couple of IPOs in the last month or so iirc).

As said above a better option would be to have a well diversified portfolio - pick a theme like 'emerging' or 'global' or w/e and then build a diversified portfolio say with 60% equities, 20% bonds, 10% property and 10% other (commodities/infrastructure/cash/w/e). Ensure you have a good split across a number of countries in your 'theme' (so for an emerging theme that might be to have a core holding - say 50% - of BRIC (say 4 funds or so), 30% UK, 10% europe ex uk and 10% maybe us?).

Now if you keep your various splits roughly in line with your original portfolio profile you don't have the need to jump ship every time one of the markets drops because you've spread the risk across the whole portfolio in the knowledge that you'll catch the bounce if and when it happens.

Just my 2 pence.

EDIT (just read post above!):

wombat42 wrote: »

It fell 5% in 2 days . I wouldnt have minded except other markets didnt fall on those days and also there was nervousness because China was just finishing a week long holiday - talk of the start of a possible correction

Not getting at you, but surely 5% is a drop in the ocean for your risk profile if you choose to invest heavily in an emerging sector? The downturn potential for something like threadneedle china is hard to figure because of the limited data to date, but if it's anything like the gartmore fund (and it is on paper) then the standard deviation is around 20%, meaning that for 95% of the time the fund's returns will deviate between -40% and +40% of it's average (which isn't bad for gartmore since it's 3yr mean is 47%).

jamesd

wombat42 wrote: »

It fell 5% in 2 days. I wouldnt have minded except other markets didnt fall on those days and also there was nervousness because China was just finishing a week long holiday - talk of the start of a possible correction

The worst three consecutive recent days for all of my holdings were -2.19, -3.09, -1.74, a drop of 7.02% in mid September, across 12 different funds. That 5% drop in two days that you saw was just normal variation for an emerging market country.

wombat42 wrote: »

Unlike most other counties China, doesnt have credit crunch or overvalued property issues. You could argue that investing in the UK is more risky than China. Can you persuade me that investing in the UK is safer than China ?

I really hope that you don't need any persuading that an emerging market country is higher risk than an established and stable economy. If you do, take a look at the volatility of some of the emerging markets over the last 10-15 years. These are single country markets that can fall 20% in a day and 50% in a week, with regional funds less volatile than that but still subject to large and rapid swings.

China doesn't have a credit crunch but it does have a property price boom fueled just like the stock market by a lack of savings alternatives delivering returns above inflation:

"Current real estate prices soaring to over RMB8,000 ($1,036) per square meter on average from some RMB6,000 in 2004, a jump of nearly 50% in four years. The average monthly wage of a Beijing resident is about RMB3,000. Work for two and a half months and live on air and nothing else and you will be able to afford a square meter of housing. Or accept the fact you will never be able to own a house."

"Property prices in China’s 70 large- and medium-sized cities jumped by 6.4% year-on-year in May, faster than the 5.4% growth in April, despite government efforts to bring prices under some sort of control. Five cities saw a double-digit growth in prices for new homes with Shenzhen leading with a 12.3% rise. Beijing prices rose 10.3%."

wombat42_2

I am currently in Neptune Global Equity and Artemis Global Growth which are top performing Global funds. They are adventurous funds particularly Neptune, currently overweight on Emerging Markets.

I may have the confidence in them to just stay with them for the next 10 years and let the fund manager make the investment adjustments for me.

wombat42_2

jamesd wrote: »

The worst three consecutive recent days for all of my holdings were -2.19, -3.09, -1.74, a drop of 7.02% in mid September, across 12 different funds. That 5% drop in two days that you saw was just normal variation for an emerging market country.



I really hope that you don't need any persuading that an emerging market country is higher risk than an established and stable economy. If you do, take a look at the volatility of some of the emerging markets over the last 10-15 years. These are single country markets that can fall 20% in a day and 50% in a week, with regional funds less volatile than that but still subject to large and rapid swings.

China doesn't have a credit crunch but it does have a property price boom fueled just like the stock market by a lack of savings alternatives delivering returns above inflation:

"Current real estate prices soaring to over RMB8,000 ($1,036) per square meter on average from some RMB6,000 in 2004, a jump of nearly 50% in four years. The average monthly wage of a Beijing resident is about RMB3,000. Work for two and a half months and live on air and nothing else and you will be able to afford a square meter of housing. Or accept the fact you will never be able to own a house."

"Property prices in China’s 70 large- and medium-sized cities jumped by 6.4% year-on-year in May, faster than the 5.4% growth in April, despite government efforts to bring prices under some sort of control. Five cities saw a double-digit growth in prices for new homes with Shenzhen leading with a 12.3% rise. Beijing prices rose 10.3%."

The China funds actually invest in Hong Kong which is a much more mature market than China.

Aegis

wombat42 wrote: »

The China funds actually invest in Hong Kong which is a much more mature market than China.

It's still an emerging market and is still going to act like an emerging market. It might be less risky than investing directly in the Chinese market, but the risk is still there.

If you really thought it wasn't that risky, I doubt you'd have sold your entire holding at the mere rumour of a downturn.

nrsql

Think a lot of this is to do with definitions. I wouldn't call what Aegis has described as rebalancing.

Emerging markets might usually be volatile but that doesn't mean they are risky.
Risk is to do with timing (imho). I would say the UK is very risky at the moment - not sure how it compares to China or Asia but I've moved a lot of funds away (rebalanced?) from it.

wombat42_2

nrsql wrote: »

Think a lot of this is to do with definitions. I wouldn't call what Aegis has described as rebalancing.

Emerging markets might usually be volatile but that doesn't mean they are risky.
Risk is to do with timing (imho). I would say the UK is very risky at the moment - not sure how it compares to China or Asia but I've moved a lot of funds away (rebalanced?) from it.

My current solution is two Global funds which are, by definition, self balancing by the fund manger continually making adjustments. But the two funds have differing philosophy.

Neptune Global Equities is an adventurous fund with about 35% in Emerging markets (including China, Russia, Hong Kong). It has about 20% in the UK but almost nothing in the US.

Artemis Global Growth has a more conventional global spread but overweight in Europe and little in the UK.

Both funds consider sectors as well as countries so it may be that there is for example 1 sector in the UK worth investing in.

jamesd

wombat42, Artemis Global Growth may appear conventional but it actually takes significant punts into emerging markets to generate growth and stay competitive.

The pair does seem like a good combination for you.