The recent capitulation of the Chinese domestic equity market (or A-shares) makes headlines almost every day. Different theories, circulating in both China and overseas, pop up frequently to explain the daily movement of A-shares. It seems the investment community gets excited when the Chinese market is on the decline (but not so much when the market is on the upswing); many investors are quite reactive to any negative news coming out of China.
We examine Emerging Markets from both the top-down and bottom-up perspectives as we try to identify where to move and what to expect. We check in on two successful EM thematic group ideas as well.
For more than two years we’ve discussed the supply-side risks to commodity producers stemming from capacity built during the manic “Third Act” of last decade’s Three Act Play in commodities. Commodity-oriented equities have indeed underperformed since 2011, but to date, most pundits have laid blame squarely on the demand side.
Commodity producers seem to believe that last decade’s commodity boom is set to repeat. This belief itself probably ensures that it won’t.
In mid May, 4% of assets were shifted from U.S. stocks to Emerging Market holdings, buying a package of individual Asian stocks. This same package is being used to boost exposure to 70% in early June.
A look at the perils with Chinese A Shares. Concern has been raised about China A Shares because they are seeing significant increases in their share float, due to government releasing restricted shares to the public.
Steve Leuthold revisits the 1987 stock market, and includes some excerpts of his commentary in the Green Book from the months leading up to the October crash. There are some stunning similarities to today’s market. Also, commentary on the current China stock market. Some have compared it to Japan in the late 1980s, but there are distinct differences.