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China economy
OpinionComment
Cheah Cheng Hye
Cheah Cheng Hye

Opinion | Why Chinese stocks and bonds are the safer bet for investors seeking value over the long term

  • Investment strategies such as ‘buying the dip’ aren’t enough to safeguard asset value amid geopolitical upheavals
  • Much better to identify winners over the long run, and China is poised to emerge on the right side of history with its focus on sustainability and common prosperity

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People visit the China International Import Expo in Shanghai on November 5. According to organisers, the event will feature stories of foreign investors to promote China’s investment potential. Photo: EPA-EFE
Cheah Cheng Hye
Global financial markets face an upheaval. Gone is the stability and security that prevailed when a single superpower in the form of the United States dominated the world and set the rules for everyone to follow. Instead, with the current world order crumbling, investing has become a scramble for safe havens.
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The current generation of investors is poorly prepared. Most of them have become accustomed to an era in which making money was a matter of spotting the best financial or economic opportunities. Politicians and generals, rather than investors, took care of messy topics such as geopolitics. From the early 1990s, the US kept order with its military, economic and cultural might, subduing any challengers while making globalisation work.

Today, the US is perceived to be in decline while the credibility of Western-style democracy and the capitalist system appears to be eroding. Consider the following:

  • Social unrest has swept the world as income gaps widen, and many countries have become dangerously divided and politically unstable;

  • There is excessive money printing, with the supply of paper money in developed countries rising more than six-fold in the past 25 years;

  • Unsustainable debts, fiscal deficits and rising inflation have become common place in many parts of the world;

  • US power is being challenged by a rising China, and at the same time, a crisis has erupted over Russia’s invasion of Ukraine;

  • The US is resorting to economic warfare by weaponising trade, technology, human talent and financial assets held in US dollars;

  • The effects of climate change are becoming real.

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Unfortunately, many investors have been spoiled by the easy money of the past three decades and have become sloppy. Investors have learned to “buy the dip”, meaning they see each market setback as a buying opportunity.
An investment style popular with the current generation is known as FOMO, which is short for “fear of missing out”. And each time the market got into difficulties, it would get rescued by governments and central banks, a phenomenon known as the “central bank put”.
It is time to wake up. What we are facing today is a fundamental disruption, not a setback. Governments and banks have finally run out of room to undertake fiscal and monetary stimulus. During the 2008 global financial crisis, it was China that stepped up to stimulate the world economy by launching a massive investment programme. This will not happen again as Beijing’s contribution went unappreciated and resulted in a heavy debt burden.

Investing today involves calculations that go well beyond financial transactions. The direction of markets is subject to the twists and turns of global crisis management and geopolitics. In this roller-coaster setting, many predictions about the market can turn out to be both right and wrong, in rapid succession, to everyone’s bewilderment.

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