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Mark Williams, Asia Income: Understanding the Chinese sell-off

Recent events in China’s mainland equity markets have been nothing short of spectacular. From their 12 June 2015 peaks until this week’s trough on Wednesday 8 July (a couple of days less than a month) the Shanghai Industrial index and Shenzhen Composite index had fallen 32% and 40%* respectively. A sell-off as sharp as this has unsurprisingly generated a huge number of column inches. This in turn may be contributing to some understandable uncertainty on the part of investors who are trying to gauge why the market has fallen and whether they should be changing their exposure to China.

When addressing these concerns, we think it is important that investors look beyond the headlines. In particular, there are two aspects that we would highlight.

John Husselbee: A classical approach to investing

A recent trip to an investment conference in Chicago allowed me to add to my nature v nurture research by listening to the thoughts of Meredith Jones, author of ‘Women of The Street: Why Female Money Managers Generate Higher Returns (And How You Can Too)’.

In her work, Jones looks at the behavioural and biological reasons why a woman may invest differently, and she advocates the theory that women have an edge in managing money. One of her observations is that female managers tend to be less prone to overconfidence or overtrading and she suggests that lower levels (c.10% of the male level) of testosterone could be a contributory factor.

Jamie Clark, Macro-Thematic: Challenging the challenged

The incumbent banks are beset by sizeable legacy issues. To our minds, these underline the poverty of their prospects relative to their Challenger Bank counterparts. Politically, the government is seeking to reduce the systemic risk of the incumbents and sate the public’s hunger for credit-crunch recriminations; financially and regulatorily, they are burdened by the imperative to rebuild capital buffers so as to satisfy regulatory capital requirements, whilst also preparing for the Prudential Regulation Authority’s autumn ringfencing proposal; and operationally, they are hamstrung by ad hoc and creaking IT infrastructure that speaks more broadly of an outmoded business model.

Disclaimer

Any opinions expressed should not be construed as advice for investment in any [product or] security mentioned or which may form the underlying content of any topics discussed in this blog.  The information and opinions provided in this blog take no account of the investors’ individual circumstances and should not be taken as specific advice on the merits of any investment decision.   Any opinions or information provided has been based on sources we believe to be reliable at the time of this blog’s preparation: no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of such information.  Neither Liontrust, nor any of its partners, employees, representatives or agents accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of our research or its contents.

Liontrust, its partners and/or employees may have had, have or will have positions in the securities (or related financial instruments) which are those referred to, or those underlying the content discussed in this blog.

Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a regulated investment advisor or licensed stock broker before investing.

Shares in companies referred to may be relatively illiquid and hard to trade, therefore riskier than other investments and there could be a large bid/offer spread, so if you need to sell soon after you’ve bought, you might get less back than you paid. This can make them riskier than other investments.