China stocks sunk on Friday posting their biggest monthly loss in almost six years should investors be concerned?
Gary Booysen, portfolio manager at Rand Swiss, said the primary concern would be the transmission from the A-share market and how it would taint the Hang Seng. However, Booysen said contagion is very unlikely.
He added that clients who have offshore accounts are likely to be in the Hang Seng. The Shanghai stocks are “incredibly expensive” he said.
The only worry to be attributed is Naspers as a holding. Booysen posed the contemplation that,“If the Hang Seng collapses, is that going to pull down Naspers?”
“The only transmission we can work out is if there’s a solid wealth effect where the Chinese feel a lot poorer and impacts the real economy, and it might feed the real economy into the Hang Seng.”
The recent upheaval in the global economy has left very few untainted. This has left investors wondering how they can “China-proof” their portfolios.
According to David Shapiro, deputy chairman at Sasfin, Greece is no longer a factor and investors should turn their attention over to European markets. “European stocks have been performing and there is some credible results coming through.”
Shapiro added that those markets are the best place to be, although they did feel the impact of the Chinese turmoil, because they too feed from it.
A telling indicator of this is Louis Vuitton sales that went up by 15 per cent in the first quarter, which marked the best quarter in three years. “Everybody was amazed why? Because they have associated luxury goods with China, but where did the growth come from- Europe and the United States.”
Shapiro described the Chinese stock market as a “disturbing feature, but not an unsettling feature”. This is attributed to the fact that China is still growing at seven per cent, he said.
While China’s middle class is holding back in recent times, they are still growing and spending, explained Shapiro.
In response to the tumultuous times that commodities have been facing, Shapiro recommends investors “leave it alone”. “Why try second guess where gold is going to go? Where oil is going ? History will show you the cycle does turn, but it takes a long time," he advised.
Shapiro said it would do investors good to take a look at tech, “that’s the new economy, that’s the cloud economy and that is where it’s all happening - not commodities”.
Booysen corroborated this sentiment adding that investors could also look to US industrials. “Remember the falling oil price is dumped by the oil stocks, but think of the massive stimulus out into the rest of the economy.”