In this episode of Ghost Stories, Siyabulela Nomoyi (Quantitative Portfolio Manager at Satrix) joined me to talk about the importance of China not just to our market, but to global markets in general.
In this podcast, we discussed:
- Why China is such an important partner to South Africa, specifically regarding commodity prices.
- The sheer scale of China as a consumer market and the impact this has not just on US-based companies, but on a locally listed company like Richemont.
- The obvious link to the JSE that everyone talks about: Naspers/Prosus and the investment in Tencent.
- The risks in Chinese stocks over the past year or so, with Alibaba as the perfect example.
- Historical valuation multiples in Chinese stocks and how the current levels compare to those lows.
- How the relationship between sentiment and reality can drive substantial changes in valuation, particularly in geographies like China.
- Our political allegiance in BRICS and the related strategic partnerships.
- The importance of the property sector in China and related support measures.
- The comeback in Chinese valuations as the economy has reopened.
- Interesting ways to play the look-through to China, with Nike as an example of a company with significant indirect exposure to the country.
- The importance of diversification in managing volatility.
- Demographic changes in China in terms of the working population and how this drives investment in different sectors, like healthcare.
- China’s approach to interest rates, which has been different to other emerging markets that tried to hike ahead of the Fed.
- The use of ETFs, like the Satrix MSCI China ETF which tracks the MSCI China Index that captures large and mid-cap Chinese equities, or the Satrix MSCI Emerging Markets ETF that has China as the largest country in its holdings. Bond exposure through an ETF is possible as well. Don’t forget the Satrix RESI ETF, which gives exposure to the resources sector.
You can find out more information about these ETFs on the Satrix website.
Listen to the podcast using the podcast player below:
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Disclaimer
Satrix Investments (Pty) Ltd is an approved financial service provider in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002 (“FAIS”). Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities. The information above does not constitute financial advice in term of FAIS. Consult your financial advisor before making an investment decision. Past performance is not indicative of future performance.
Great Podcast. Very informative and eye-opening.
I expected a bit more info from the guest. This was just a summary of the current situation which is commons knowledge.
Hi – not common knowledge to everyone! The goal here was to give a sweeping overview of why China is important. For most people, there was stuff in here that they wouldn’t have necessarily known. Common knowledge isn’t as common as you think! 🙂
It may be common knowledge to you, but it’s not to some of us 🙂
I listened to SAFm this morning who criticised China for the Failure of Transet’s inability to service the trains the Transnet Procurement board purchased from China which were not suited to South Africa’s existing rail network infrastructure. China is allegedly wanting to charge Transnet a premium for components thereby circumventing procurement policies. Meanwhile, Transnet claims they cannot get the components from any other supplier. Um, so I guess that places China in a very strong position and puts pay to current procurement policies. However, it highlights the Cancer in Africa which it the lack of ingenuity, the lack in aptitude to turn a negative into a positive. Clearly there is a golden opportunity to produce the components in South Africa and to stimulate the industrial and engineering sectors?!
The previous dispensation under severe sanctions and embargoes built its own industries to support the infrastructure expansion and maintenance the Nation needed. This is where SOE’s were so crucial to Government.
South African should be cognisant of the fact that our economy has been hollowed out by Western Nations including European Countries (Germany, Sweden, Norway, UK et al.). It was Mr. Anderson the turn around specialist from the US who sold off much of SAA’s assets and absconded with a huge performance bonus. These economic assassins have been active in South Africa for a very long time. Our partnership in BRICS is not the cause of our economic woes as SAfm and Alec Hogg will have us believe.
This is so true and in many ways this is such a practical and realist solution for SA right now. The opportunity to the upside for our country is huge, if only we can get great leaders who can think.
One thing that does not give me any comfort about Chinas approach in Africa is their somehow selfish & ruthless in their business approach, they always use their own equipment, resources and it seems that most of the contracts they have across Africa, they are benefiting way more than the countries they claim to be helping. Somehow China is currently owning a large portion of African countries through its very sneaky deals which it always has an upperhand, more like an iron fist to the neck of those countries.
E.g. https://www.africanliberty.org/2018/09/10/like-zambia-sri-lanka-also-handed-over-port-to-china-to-pay-off-debt/
https://www.hellenicshippingnews.com/china-to-take-over-kenyas-main-port-over-unpaid-huge-chinese-loan/
Unfortunately the governments have already somehow been captured (or not smart enough) to see into the future of those deals they are getting into. However I am also very envious of how that selfishness is something has benefited and transformed their economy to become the second largest economy in the world. How I wish that our own country could learn from that and stop trying to please everyone at our country’s expense.