Rise of the 5-star red flag: Investing in China

As the world’s major economies are trying to tighten monetary policy China is the only country moving in the opposite direction to promote economic growth.. This represents a great opportunity for investors to start bargain hunting in a country with a population of over 1.4 billion.

Principal Asset Management believes that the downward pressure on the Chinese market and economy last year will change in 2022, primarily due to regulatory crackdowns and defaults on the technology sector.

With the support of the government and central banks, the company expects the Chinese market to continue to attract foreign capital inflows this year.

“At the Central Economic Working Conference held last December, Chinese leaders emphasized that the country will focus on stability in 2022. As a result, the pace may be slower and more. However, we expect further monetary policy easing in the future, which should help keep this year’s economic growth in a reasonable range. “

The People’s Bank of China’s (PBoC) commitment to supporting the Chinese economy is evidenced through a recent commitment to use more monetary policy tools to promote credit growth. The loan prime rate, which is the rate at which banks charge their priority customers with them, is a good example.

As a result, fixed asset investment increased in the short term, with sectors such as infrastructure, transportation and telecommunications becoming the main beneficiaries.

“We believe that the country’s credit cycle (that is, the expansion and contraction of access to credit over time) is now on the verge of a new turnaround,” says the principal. ..

Principals also believe that China’s regulatory crackdown, which had a major impact on markets and the economy last year, is likely to be less intense in the future. It’s over again.

“Investor sentiment towards the Chinese market should gradually recover from this year,” said the principal.

Another clue that investors can take from last year’s China Central Economic Working Conference That Green economy and business continue to rise..

The conference focused on carbon neutrality and renewable energy, and the key point raised during the event was that coal remains the foundation of China’s energy system, causing massive air pollution. However, the country is shifting to clean energy and is actively promoting it. That.

As a result, China’s green bond market has recovered from the aftermath of the Covid-19 pandemic and continues to grow. “Overall, China’s commitment to carbon neutrality by 2060 represents a structural change in China’s economy,” said the principal.

The Chinese market is also attractive from a valuation point of view, as investors are pricing a lot of negative news and trends from last year. This year China and the world will gradually reopen and decline Normalization of economy and manufacturing activities.

“In the future, I like sectors supported by revenue growth and low policy risks, such as consumer durables and green technology. The Chinese government will raise the total income of its people and expand the size of the middle class. The focus is on the country’s long-term positives. While the Green Initiative will be China’s focus over the coming decades, long-term consumption.

“Roughly speaking, we prefer a cyclical and valuable sector that benefits from the reflation and resumption of the global economy,” says the principal.

Investing in China is one of the principal’s strong proceedings, so investors who want to ride the potential uptrend in the Chinese market can invest under the company with some money. increase.
These funds are Principal Greater China Equity Fund, Principal Asia Titans Fund, Principal China Direct Opportunity Fund, Principal China-India-Indonesia Opportunity Fund, and Principal Greater Bay Fund.

As of December 31, one of the company’s flagship funds, the Principal China Equity Fund, has generated cumulative returns of 60.77% and 87.23% over the last three and five years. Investors have also generated a return of 193.86% since the start of June. 2007.

The Principal Asia Titan Fund has provided investors with returns of 60.65% and 72.37%, respectively, over the last three and five years. Returns have been 148.59% since the start in March 2006.

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