China Invests in China
The country least concerned about tariff threats against China… appears to be China! Investing bulls on the Shanghai Stock Exchange ran the show yesterday, dismissing President Trump as ‘the boy who cried tariffs.’
Few will invest in Chinese stocks without doing a little extra due diligence, fewer still will doubt American stocks for their security. With every passing moment, however, these dynamics change. Every country pitches itself to international investors every day, and yesterday, China did quite a job. Knowing the market was already hopeful of decreasing interest rates around the world, President Xi added a second tailwind by loosening the financing rules for local governments. That will allow them to more easily invest in public infrastructures like roads, railways, and bridges, more easily. Xi wants China to invest in itself, and be it a power play in the trade war or just business as usual, it’s gone down well with Chinese investors.
All three of China’s stock exchanges were in good spirits, the flagship Shanghai Stock Exchange (SSE), the smaller Shenzhen index, and the ChiNext Composite index for start-ups. Linus Yip, chief strategist at First Shanghai Securities, called Xi’s latest policy “supportive” at this crucial time. President Trump is the obvious candidate to crash the party, however. The US leader threatens further tariffs if Xi doesn’t meet him at the G-20 in 2 weeks for talks. The bottom line longer-term? Investing in Chinese stocks has some caveats. Xi will be your biggest business partner, and the earnings reports need constant scrutiny. However, on days like today, China reminds us of its offer of diversification across borders. The second largest economy in the world isn’t going away.
