Can China Revive Asian Markets?

The media is making a big song and dance about the Syrian crisis and also about the likely impact of tapering (when it finally happens) on global markets. But what about China? It seems that we have conveniently forgotten the massive influence that China has on, not only our market here in Singapore, but other Asian markets too.

Thing is, bad news sells newspapers and it also captures eyeballs. But for us investors in Singapore, what happens in China could have more impact on our finances over the long term than a volley of Tomahawks targeted at Syria or even Ben Bernanke trimming a billion or twenty off his monthly money-printing activities.

According to HSBC, China could eventually become Singapore’s second-largest trading partner. Currently, Singapore carries out most of its trade with Malaysia, which is not only understandable but also unlikely to change. The Eurozone pips China into the second place but that may not remain the case if HSBC analysts are correct.

So rather than stew over Syria or torment ourselves over tapering, our focus should be on China’s growth. And on that score, the outlook appears quite rosy.

The recent economic numbers seem to suggest that China is rebounding after two straight quarters of slowdown. Its factories are making more money but more importantly its services sector is growing thanks to domestic demand.

China’s services sector accounts for just under half of its economic output. That, however, is less than many developed economies such as the US and the UK.

However, China’s goal, as far as we understand, is to steer its economy towards one that will eventually be driven by consumer spending. The reason for that is simple – it is easier for China to eventually tweak domestic spending through fiscal and monetary policies than try to influence demand for exports that it has limited control over.

From a top-down investing perspective, the implications are obvious – look for companies that could play a part in China’s economic transformation.

These might include deep-water port operator Hutchison Port Holdings (SGX: NS8U) or Hongkong Land (SGX: H78), which owns properties in Beijing, Chongqing, Shenyang and Chengdu. Other business that might be worth investigating include Raffles Medical Group (SGX: R01) and baijiu maker Dukang Distillers (SGX: GJ8).

So can China revive Asian markets? I believe it can.

Truth is, there is a wealth of opportunities on our doorstep just waiting to be unearthed. Some of those assets might be found within the 30 companies that make up the Singapore benchmark index, the Straits Times Index (SGX: ^STI), while others might be tucked away amongst the mid and small-caps.

But half the fun of investing is to discover those investments before anyone else does. The other half of the joy of investing is to buy them before anyone else will.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.