Andy Rothman, investment strategist for Matthews Asia in Beijing, has a message for Bridgewater founder Ray Dalio: China is not a basket case that investors should avoid.
In their nine-page research note, Bridgewater Associates acknowledged that they were surprised by recent volatility in China’s A-share market. Two decades and more of experience have taught me, and Matthews Asia, to look beyond the volatility of China’s stock markets and look at the long-term opportunities.
Rothman outlines is areas of disagreement on two key points:
- “(The) stock market was in a bubble that has burst.” When Bridgewater published the note on July 21, the Shanghai Compost was down 22% from its peak but up 24% year-to-date and 96% from a year earlier. Those numbers don’t scream bubble bursting.
- “(E)ven those who haven’t lost money in stocks will be affected psychologically.” Improbable, writes Rothman. Only 4% of the general population and 7% of the urban population own stocks; 69% have invested just $15,000. Further, bank deposits slowed marginally, 10.4% vs 11.4% a year earlier.
Rothman also notes that after the 2008 market collapse, retail spending continued to gallop along. The stock market and the economy in China are not one in the same.
For further details, go read Rothman’s thoughtful response to Bridgewater here.
Photo: JERRYANG