India remains a much more straightforward, long-term story than China, Christopher Wood, the global head of equity strategy at Jefferies, said in the latest edition of his immensely popular newsletter to investors called 'GREED & fear'.
Making his point, the equity strategist said: "India remains a much more straightforward long-term story than China, which is why GREED &
fear has 39 percent of the Asia ex-Japan long-only portfolio, long-term in its focus invested in India and “only” 25 percent in China."
However, Wood also clarified that this must not lead to the conclusion that China is "uninvestible". He pointed to the new messaging coming from Chinese political quarters which gives hope that China may soon be on the revival path following the decimation of the residential property sector in the aftermath of the Evergrande crisis.
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"What is certainly self-evident for the moment is that the recently concluded National People’s Congress (NPC) meeting has sent the clear message that China is committed to restoring healthy growth after the trauma of last year, including support for the residential property sector. " the GREED & fear newsletter stated.
Wood is inclined to put his faith in the Chinese political climate taking a positive outlook towards the private sector, given that an overwhelming 80 percent of the employment and most of the wealth creation in China comes from the private sector.
At the same time, Wood expressed that there is a certain cynicism against Chinese President Xi Jinping within the affluent classes. While there has been a dent to the unbridled confidence in the future, the situation, Wood emphasised, is not completely hopeless.
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"No one in China is under any illusion that (industrial) policy
is ultimately determined by one man. This is the lesson from last year’s Covid policy, and it is only fair to say that the dramatic U-turn on Covid, following the National Congress of the Communist Party of China late last
October confirming Xi Jinping’s continuing leadership has generated a certain cynicism, at least among more affluent sections of the population, which GREED & fear has not observed before," he said.
He also goes on to add that "the unbridled confidence in the future, which was definitely a feature of China in the past, no longer exists. But that does not mean the situation is hopeless. While mainland billionaires have set up family offices in Singapore, for those who have not yet made hundreds of millions of dollars the Chinese domestic market still offers massive
opportunity and even billionaires are probably most comfortable investing part of their money back into the mainland once they think they have secured their boltholes."
Wood also reiterated an interaction with another Chinese investor who drew a parallel between Teddy Roosevelt's trust-busting agenda in the 1900s and the crackdown on the Ant Group by the Chinese government.
"It is also the case that many of the policies designed to rein in the internet companies during 2021 made eminent sense, be it a desire to rein in
oligopolistic behaviour or, in the specific case of Ant Group, to address the issue of a lending model where Ant had almost no skin in the game. In this respect, one Chinese investor GREED & fear met last week in Beijing
and compared the policies with Teddy Roosevelt’s trust-busting agenda in the US in the 1900s. This is an interesting comparison to GREED & fear and certainly has some merit." the newsletter added.
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