I don’t know about you, but I am sick and tired with everyone expressing an opinion about China. I am so bored with China. And yet …
McKinsey published a report earlier this month: “What can we expect in China in 2017?” (https://goo.gl/8E9kd0). The general tone of the article was negative.
In December 2016, the Guardian reported “China to rein in outward investment as domestic growth stalls” (https://goo.gl/zKRxm7). Also, Forbes reported “China Blowing Major Bubbles In 2017).
Even more ominously, “Trump threatens 45% tariffs on Chinese goods” (thisimoney, January 2017, https://goo.gl/Qmv3XD)
I saw an interesting article on the Montogo Consulting website: “Price is what you pay, value is what you get”. (https://goo.gl/yBAozL). They concluded that trailing PE was a better indicator than CAPE as a predictor of future returns. They also cited Invesco Perptual research that CVI (Composite Valuation Indicator) as being the best guide. The CVI is a combination of trailing PE, PBV and dividend yield. They did not elaborate as to how the composite was calculated precisiely.
But maybe we don’t have to. I decided to create 3 tables giving the top (or rather bottom, depending on how you look at it) 5 countries in each category. Here is what I came up with:
- PE (ascending): China, Russia, Turkey, (Emerging Europe), S. Korea, Singapore
- PBV (ascending): China, Russia, S. Korea, (Emerging Europe), Singapore, Austria
- Yield (descending): Czech, New Zealand, China, Austria, Australia
China is the only country that is coming out as cheap on all 3 metrics. Countries coming out as cheap on 2 out of 3 metrics are: Russia, S Korea, Singapore, and Austria.
So yeah, China. It’s easy to find investing trusts that invest in China or Russia directly. BEE (Baring Emerging Europe) would be a good place to invest in Emerging Europe generally. BEE is over 50% invested in Russia, with stakes of over 10% in Turkey and Poland. Only 3% is invested in the Czech Republic.
Other countries will be more difficult to invest in. I could not find an investment trust that invested in Singapore, for example. Singapore is a highly developed country, dare I say it more developed than the UK. Singapore looks to be the cheapest developed country out there.
I don’t think I’ve been so bullish on China; although admittedly, it was a low bar to jump over.
Stay safe out there.