The strategy of buying both the US and China is something I've been discussing. I think the US looks the most favorable because when the US lowers interest rates, the next best region is China. You may remember that when the US lowers interest rates, the money that had been flowing out of China stabilizes. As the dollar weakens during this process, liquidity in China improves. When liquidity in China improves, the government also has more room to actively inject money into the economy. This is a key point regarding the current economic policy, which was announced shortly after the Federal Reserve's interest rate cut. 

Hello, this is Economy Stong Uk. Today, let's talk about the Chinese stock market. There is a chronic problem in the Chinese stock market related to non-tradable shares. What this means is that most listed companies in China have shares that are not tradable, which are controlled by the government.

Holding shares or being related to other public sectors means that these entities hold stocks. When they start to sell the stocks they hold, the market faces strong supply pressure and an oversupply issue. Due to these oversupply problems, every time there is a massive surge in the Chinese stock market, the disposal of non-circulating stocks or stock disposals by other public sectors causes supply-demand imbalances, leading to collapses. This has happened repeatedly. In such situations, the Chinese government, particularly targeting financial institutions, has been saying they will not sell non-circulating stocks and will also help to liquidate them, and they will take over various measures. They are also lowering the reserve requirement ratio and planning to stimulate the economy, especially by creating funds that will buy stocks.

As it became visible, the stock market has now ignited. This year, the stock market that has risen the most in the world is now the Hong Kong stock market. The second place is likely to be taken by Kyrgyzstan. The characteristics of the Chinese stock market have been fully revealed today. What kind of characteristics does it have? It is very sensitive to government policies. This means that it is not closely related to the global economic environment; this is a characteristic of the Chinese stock market. In other words, its own schedule is much more important. The Chinese government might think, The stock market is struggling too much, and the people are suffering, so we need to stimulate it. They might consider raising stock prices to sell some of our non-circulating shares as a strategy or when there is a need to do so. When they raise stock prices, most of the rhetoric is about economic stimulus, and they also restrict the sale of non-circulating shares. Furthermore, they inject money into the market.

If we do this, people will forget everything again and jump back into the market, forgetting the stock market crash that happened in the past. Yes, this happened in Korea as well. In 1989, many people may not know about the public offering of national stocks, but companies like POSCO and Korea Electric Power Corporation were listed at that time. The market was shattered because 20% of the market capitalization was listed, and it led to an immediate collapse of the stock market. Experiencing such events, the Chinese stock market has gone through a lot of struggles. In the process of facing these challenges multiple times, the Chinese people have learned a pattern: when the government stabilizes the economy, the stock market rises sharply, and they jump in at that time. They tend to sell off when they think it's a suitable time and they have made some profits. This short-term trading tendency was also seen in 2008 and again in 2015 and 2016, so we must not forget this.

In that regard, I view the recent rise in the Chinese stock market as a short-term opportunity. Among the clients who joined the Prism platform, many have likely received rebalancing signals during the Chuseok holiday. Depending on the products they subscribed to, some may have exposure to Chinese stocks, and the weight of these stocks varies. For those who have invested in neutral or growth-oriented products, there is some exposure to China. Given the recent turmoil in the Chinese stock market, signals for selling and rebalancing would have emerged. As indicated by these signals, I believe that one should hold onto Chinese stocks to some extent because we never know when they might rise. However, when they do rise, I think it is essential to appropriately reduce the weight of those stocks. It’s not looking good. While I have generally supported increasing exposure to the Chinese stock market, I mentioned this in our year-end broadcast.

I think I've mentioned this several times, but it will be on our YouTube channel. We are implementing a long-short strategy in the U.S. and China, while reducing exposure in Korea and Europe. I've been talking about this because the U.S. seems to be the best option. When the U.S. lowers interest rates, the next best region is China. I wonder if you remember that. So, with this strategy, when the U.S. lowers interest rates, the money that was flowing out of China into the U.S. tends to stabilize. As the dollar weakens during this process, liquidity in China improves. When liquidity in China improves, the government also gains the capacity to actively inject money into the economy. You should know that the timing of this current economic stimulus policy came right after the Federal Reserve's interest rate cut. However, just because they are injecting money now doesn't mean that the situation will improve, especially considering the common prosperity policy that the Chinese government implemented in 2021.

Do you remember Jack Ma? The company that was taken over, DD, is the largest taxi-hailing company in China. They were going to go public on the U.S. stock market like Uber but almost went bankrupt. That has changed, right? No, it hasn't. The idea is to take money from the rich and distribute it. Well, most of it will probably end up in the pockets of the Communist Party members, but that's how they are currently managing the economy. The existing policies haven't changed; it's just that the real estate market is really struggling and the stock market is also very tough, so they are injecting money here to give out. It's good, right? But I think there are still many people who will see it as a reality check. Fundamentally, the attitude towards China's information has changed, and the most representative example is the concept of common prosperity. However, if this continues, President Xi will have to put his neck on the line, so I think it won't be easy. For now, the economy is trapped in deflation.

The short-term stimulus policy was implemented because we were struggling. In such cases, I will take the position of doing a good rebalancing. I think a maximum of 10% is quite a lot, but now it has become about 15%. So, we should sell about 5%. My basic long-term outlook on the Chinese market is bleak. However, from the perspective of asset allocation, it is a country that is good for investment. When the U.S. or other countries are struggling, there are times when China's market suddenly rises. It happened once in 2015. Such occurrences are common in this country, so we are holding onto it out of fear of missing out rather than expecting significant returns. This is my position. Yes, it's about South Korea. South Korea has been doing the same things as China since the 1980s and 1990s, and even recently. Whenever stock prices rise, the Chinese government intervenes, and in our case, whenever stock prices rise, the owners...

The stock markets in our country and China are in such a state. What are the characteristics of these countries? That's right, they are countries with governance issues. And in countries with governance problems, even if the economy grows, the stock prices often do not rise. So, from the perspective of asset allocation, while they are growing countries and should be included, there is no reason to allocate a significant portion of the total assets to them. I want to say that this applies to both Korea and China. Thank you very much for your attention.

중국 역대급 부양 정책, 자산 비중 늘려도 될까?

"환율의 미래"와 "프랑스 탐방기" 등 10여권의 책을 쓴, 이코노미스트 홍춘욱입니다. 25년 넘게 이코노미스트 일을 하면서, 반복되는 질문에 답하느라 힘들었는데.. 동영상을 통해 자주 묻는 질문에 대해 쉽게 답하고자 합니다.


*비지니스문의 : hong8706@us-all.co.kr
*강연 문의: https://c11.kr/19l7h


중국 역대급 부양 정책, 자산 비중 늘려도 될까?

스크립트