Our Chinese Takeaway

Why we invested in China

We had been watching and waiting to buy Chinese shares for some time. We believed that China was finally clamping down on corruption and the growth outlook seemed better than for other markets. But we didn’t want to invest unless we felt the market was cheap.

On 6th October 2014, just after the pro-democracy demonstrations in Hong Kong had taken the Chinese markets lower, we decided to allocate some of our portfolios’ spare cash into China.

We chose the iShares China Large Cap UCITS ETF because it invests in the FTSE China 50 Index offering exposure to 50 of the largest and most liquid Chinese stocks (Red Chips, P Chips and H shares) listed on the Stock Exchange of Hong Kong.

Here is a buy confirmation for a typical client

Why we sold our investments in China

We had intended to hold our shares for the long term once we had committed, but that didn’t happen.

On the 9th April 2015, almost 6 months later to the day, we decided enough was enough. The markets were now looking incredibly stretched, filled with millions of Chinese, borrowing to buy shares. Now that’s never a good idea in my opinion.

We know you can’t time markets accurately and that this may not be the top, but we decided we had better cash in our chips anyway. The Chinese stock market began to look like a casino, and we had already made a lot of profit.

Here is the sell confirmation for the same client.

For the keen eyed amongst you, the difference between the buy amount and the sell amount equates to 40.9% profit

You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealin’s done

Kenny Rogers – The Gambler

We are not gamblers, we are investors.

What has happened since?

Were we right to sell? It’s too early to tell yet, but if you see a Chinese fund appear in your portfolios again soon, you will know that Chinese shares have dropped again and we have bought some more.

After all great Chinese meals, you feel stuffed initially but an hour later you feel ready for another one. 🙂