Is the downturn in the Chinese stock market only temporary?
Or should we get out of here ASAP?
Answers
2547 points
Oldman answered 5 months ago …
If you believe China will disappear, by all means, sell. If you believe that they may have some worthwhile investment opportunities over the next decade...hold. I bought Fidelity's HongKong& China fund when it first appeared, and sold parts and pieces over the next 15 - 20 years. When the Asian Banking Crisis (precipitated by a revaluation of the Thai Bat) occurred, the share values went down considerably...but I didn't believe then, and don't now that Chinese markets would implode.
Right now, in an attempt to cool inflationary pressures, the Chinese govt. is increasing the reserve requirements iof the banks ... and this has a temporary bearish effect on the overheated stock markets. They've done this several times over the past year, and may do some more.
If you're trading the FXI, then you need an offsetting hedge, which does exist (Inverse China ETF Index), but that requires large capital apportionment to the shares.
303 points
MoresbyChief answered 5 months ago …
I'm a long-term investor and have always had some exposure to China through Emerging Markets funds. However I had avoided getting too involved with China (and India) as it seemed an expensive market and due a correction. With the Shanghai Comp now down about 50% I am seeing this as an opportunity to build up a position, using a boring tracker fund (FTSE/Xinhua A50). I am not diving in head first however, instead entering bit by bit - I made a small purchase the day after it fell 8% and will be making 3 or 4 more over the next few months.
The market could easily go down a further 20% (or more) from here (at which point I would likely buy more). Or it could rebound and go straight back to 4,000 or 5,000 within 6-12 months. Without a crystal ball I think it's sensible to average into investments like this. What I am sure of is that China is a good bet in the long term, so with a 10+ year time frame you can invest fairly confidently.
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