Should you invest in Chinese assets?

In spite of being one of the largest and fastest growing economies in the world, we believe investors do not have enough exposure to Chinese equities, in particular onshore Chinese equities. We‘ve found that the average international investor’s total China exposure is 4.6% of its total assets.

According to mainstream financial media, the Chinese economy is not looking good. Chinese stock investors made a run for it, pulling out $446 billion in less than a week. The MSCI China Index experienced a decline of 2% on Tuesday, extending losses for a sixth consecutive day, marking the longest losing streak since October 2022, and its not the only one posting negatives.

The Hang Seng (HK50) has been in freefall since April 17, from $20,789 (USD) down to $19,561 (-5.91%). Overseas funds sold a net $754 million worth of onshore China stocks via trading links with Hong Kong on Tuesday, adding to an outflow of about $1.7 billion in the previous two sessions. Are institutional investors expecting Asian volatility？

The April meeting of the Communist Party‘s Politburo, the nation’s top decision-making body, is expected to turn its policy focus to boosting business confidence and increasing jobs without adding extra stimulus. The Peoples Bank of China has already signaled it will begin dialing back the pandemic stimulus too.

With fewer stimulus influences, a rebound from the downtrend seems unlikely, so Chinese indices might not be a good idea at the moment. But what about individual Chinese stocks？

Chinese tech and pharma

Tech and pharma stocks are the go-to asset for many traders, but they were the biggest losers for China in the last quarter. The Chinese market is facing a lot of negative geopolitical noises, including Bidens executive order to restrict investments, and there are very few positive catalysts on the horizon.

Investors seem to be having concerns about the sustainability of the recovery in China and the heightening of geopolitical tensions. People are unsure about the long term and are reluctant to buy and hold. And who can blame them？

Theres a lot of propaganda flowing about China and the US making it even more difficult to forecast stocks, indices, and currencies, from both sides of the equator. Investors and prominent economists are also questioning the accuracy of Asian macro data, as corporate earnings and guidance remain soft, contradicting currency price actions. So, if not tech or pharma, then what？

Alternatives to Chinese assets

On the bright side, Exness still has plenty of options for you to consider. Gold is approaching a 3-year high after rallying from $1,636 to $2,000 (+22%) over the last 3 quarters. It might be too late for the long order, but XAUUSD is famous for expansive ranges over short periods, and the Stochastic RSI gives distinct overbought signals.

Install the Exness Trade app, add XAU to your watchlist, and check the daily news feeds and price notifications. If gold corrects to the downside, it could happen quickly.

If you prefer currencies over metals, Yen is the hot topic in the financial media right now. Whispers coming from Japan claim the interest rate is stable, and recession may land soft, making USDJPY worthy of attention.

JPY had a 3-month decline in 2022-Q4 before the January 2023 rebound. Currently, USDJPY is sliding down from 134.89 (JPY), passing 133.27 (-1.20%), making a possible entry point for traders who are optimistic about the Japanese economy, but beware, JPY is still much higher than most years over the last decade, and no nation is fully recession-proof.

It seems gold and yen are still the defensive assets that cautious traders have been turning to for decades — there may well be a good reason for the safe-haven status.