I never mentioned this on the blog but many months ago I decided that I would probably get back into China, one way or another, when/if the Shanghai Composite dropped 60% from its high.Monday morning Shanghai got within a few points of 60% down and I bought in on Monday by swapping out of a mega cap telecom name from Western Europe and going into China Mobile (CHL). Not every client owns China now but many do.
To be clear my net long exposure is the same, save for rounding up or down.
Earlier this summer in a video I said I might go in this summer, that I was mulling three names of which CHL was one. I was also mulling a toll road stock and a broader infrastructure stock listed in Hong Kong. I'm not going to disclose those names as I can see going from what is now about 2% up to 4% (not sure when at this point but talking months) and for now those two would be my best candidates for doing that.
As an administrative note I am aware that CHL is not listed in Shanghai. What I bought is an ADR of a company listed in Hong Kong--but not an H-share. CHL simply has a lot of customers on the mainland.
The thinking for 60% was, not surprisingly, very simple. I have been out of China since Q2 2007 as I thought it was overheating (too early I know) but I have never thought the mania in China was worse than the bubble in tech stocks so I have always felt the decline would be less than 75%. 50% declines don't occur that often and so 60% seems like a reasonable overshoot of cutting in half.
Looking out over any length of time what part of the world seems poised for a lot of growth, regardless of the reasons? Asia probably needs to be in the top two of the answer. This has been true all the way down for China and now the markets are much cheaper than they were, much cheaper.
The market could obviously go lower here, that would be easy but it is down a lot now, it is becoming a center of the universe and, again, it is down a lot. I could easily envision the purchase being uncomfortable for a while but that just goes with the territory with some purchases.
There are plenty of bearish points to make about China and they are probably all true but the market is down 60%.
10 comments:
Ouch! Are you recommending a stop? Or is this a long term play to buy more on the dips?
J.C.
I'm sorry I don't think I follow you.
I am not recommending anything. As I have been doing for four years with this site, I disclosed action taken on behalf of clients and why I took it.
just curious...why CHL versus a more broad etf such as FXI or GXC?
GXC is 27% financials, FXI 41% financials. I don't want Chinese financials.
They are both heavy in energy too and while I had SNP before i think there could be something weird coming with the subsidy issue. I might be wrong but I don't want to have to be right about that.
CHL has hundreds of millions of customers and there is plenty of population still to go.
I'm sorry, maybe I'm confused. CHL has been in a downtrend as you noted but it's down another 5% this morning. I wondered if there is a level at which your client throws in the towel on a trade or is this a long term play.
J.C.
this is not a trading site. i wish, the day after, the entry point was better, obviously, but it wasn't.
You seem a little optimistic on china to me. I think it has further to fall, but you are correct about being down 60% so you have missed most of the fall.
Of course i think most places have further to fall
hey, that's the PPT in the pic!
What about CHN?
Wow, is China down 60% from it's highs? If it's anywhere close to that it surely is somewhat of a bargain. From what I remember from living in China '06/'07 the Chinese people love their phones. Every day the many shops were packed with people browsing and buying the latest handsets, and they didn't seem too worried about the bills when it came to using them either, even the rural folk found a handset improved their lives.
China Mobile was by far the number one provider in all the regions I visited, and you'd often have to buy a new sim card if you were visiting a different province so I saw quite a few sellers (usually in train stations and airports).
Not tub thumping for you, Roger, just saying it like I saw it.
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