I did the rounds of a bunch of domestic fund managers and analysts yesterday and they all agreed that when it comes to a safe, long-term bet on China’s stock markets that there are really only about five companies worth investing in.
Naturally they all had distinct strategies for short-term gains, eyeing different sectors and stock cycles, but they all came up with an identical five safehouses for money. There are no prizes for matching their picks because they are probably pretty obvious to most China watchers; the trick is simply knowing when the time is right to buy into them.
For some, it’s best to get in now. For others, a slight correction in the near future could see a short but modest decline in the price of entry.
But for a real safe bet, you can’t go past keeping your money in the bank; all believed the veracity of a current rumor that the RMB will be allowed to appreciate 5% against the greenback over the next 12 months. Some read it as "by at least 5%", others as "by up to 5%", but they were all convinced the pace of change would accelerate.
China’s willingness to let the RMB appreciate seems to be inversely proportional to the ferocity of calls from abroad for revaluation. New US Treasury Secretary Hank Paulson understands this well, and has given China room to preserve face and enact reform at its own pace.
Paulson’s strategy appears to be working. As long as the newly Democrat-controlled US House of Representatives doesn’t rock the boat in the near future, I will bypass the markets and keep my RMB in the bank.
There are heftier gains to be had, but as an unwilling holder of offshore debt, that 5% means more money for my bank.