Is it time to increase exposure to Asia? | 30 Aug 2021
Description
• The first thing to understand is President Xi’s policy goal of common prosperity - he wants to reduce inequality across China. He’s also extremely concerned about the low birth rate in the country - despite reversing that one child policy in 2016, the birth rate has continued to move lower. Both of these issues are linked and they also have serious implications for the private education sector and the internet sector.
• The net effect is a less friendly investment environment - internet stocks will face increased regulation, higher costs, lower returns on invested capital and for the companies that are not focused on the areas that China views as strategically important, it means making more investment in these areas or if not, then making donations to state-backed initiatives that are focused on these areas.
• We’ll be watching the region closely but for the time-being we’re happy to stick with our position given the heightened uncertainty, regarding earnings, valuation and sentiment.
United States
