Why 5G is important for investors and how to get the right exposure?

Investors like to conceptualize mega trends into investment themes, which fund managers use to identify strong companies based on top-down investment approaches with a focus on broader, macroeconomic themes. New investment themes always emerge from time to time, such as dot.com around the millennium, social media & robotics in the past decade, or sharing economy & artificial intelligence not long ago. What do they have in common? Technology! A sudden shift in technology would make transformative changes that redefine work processes, rewrite the rules of competitive economic advantage, and eventually the structural breakthrough will bring the potential output to the next level. That’s why market is interested to find out if 5G is a crucial investment theme.

EM ASEAN: The peace in the midst of the storm

“Think about what is happening worldwide right now. The US is dragging down global growth by attempting to impose trade tariffs everywhere, China is facing a major economic slowdown, Japan continues their third “lost-decade”, Germany is heading into recession, and the UK is still debating with EU about the way of Brexit. These are just the highlights of how the top five economies are doing, not even mentioning the more troublesome territories such as Italy and Argentina which may have to deal with their escalating debt problems. These markets accounted for more than 70%-80% of the global stock markets depending on which particularly benchmark one is using to measure against the performance. The issue gets more complicated when the US market, weighting over 50% in most clients’ equity portfolio, seems to be exhausted after recording the longest bull run in history whilst still hovers at all-time high. The most imminent question among investors is where to find the peace in the midst of the storm.”

CHINA A FACTOR REVIEW: 2019 Q3

The US-China trade dispute rumbled and concerns over global growth continued to mount in Q3. Factor-wise, Quality continued to outperform while Value is trailing, badly. Overall, the China A-shares ended roughly flat in Q3, and it was a meaningful quarter to the market with MSCI, FTSE, and S&P Dow Jones all made announcements of (further) inclusion of China A-shares into their benchmarks. Heading into Q4, we believe “Megatrends” continue to be the key investment themes and “Diversification” core to portfolio risk management. We don’t see a Value trap environment, but the comeback relies on many catalysts amid the current market uncertainties. Consolidation will happen as China rebalances to a “new normal”, and we believe Quality Growth is the best approach to capture domestic champions.

How did Benjamin Graham do in China-A this year?

When over 30% of the investment-grade bonds are selling at a negative yield, the longest bull market in the US seems to be wobbling, global growth is decelerating and the two biggest economies are in a dispute over trade and technology, there is a need for most investors to anchor themselves in a stronghold to face the volatile markets. Benjamin Graham’s Intelligent Investor, often referenced as the best book on investing ever written, may be able to offer a bit of insight for us. At the end of the day, an intelligent investor is a realist who sells to optimists and buys from pessimists. The author has experience to back it up: Graham's personal losses in the 1929 crash and the Great Depression led him to perfect his investment techniques.

The Not So New, Very Abnormal

Forget about Donald Trump – this is what the markets are really worried about. Forget about the Trump Impeachment. That’s a sideshow. It will get sordid but Democrats won’t get rid of Donald Trump without the support of two-thirds of the Senate. That’s unlikely to happen, given currently available information about the President’s activities. At most, the impeachment inquiry will contribute to the political point-scoring of the 2020 Presidential Election. The greater decision facing investors now is whether they are prepared to put more money down on renewed quantitative easing in Europe and eventually the United States – a phenomena that will simultaneously feed asset markets and distort resource allocation around the world.