New call-to-action


See all


Why Chinese Markets Are On A Tear?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Asian markets rallied strongly yesterday, with the Shanghai Composite closing at the best level in almost a month. The index is now up around 20% year to date, and more when measured in Aussie dollar terms. This is far ahead of the ASX 200, despite China announcing its worst growth numbers in almost three decades, as the trade war takes an increasing toll on the Chinese economy. The index is just shy of the 3,000 mark, and bullish sentiment may push it over that level in the not too distant future.

chinese market - report

This highlights the importance of investing internationally, instead of having all your assets in Australia. The underperformance of many Aussie investors looks even worse if you compare the Shanghai Composite to commonly held Aussie stocks like the big four banks. Despite positive tailwinds like the government’s response to the royal commission, Australia’s banks have done far worse than a Chinese index that has battled tough headwinds all year. You also have an opportunity to outperform the index, as some of the stocks which we selected for model portfolios in our international investing platform, Macrovue, have significantly outperformed their benchmark. One of these is Tencent, a company that is up 1227% over the past 10 years and is only just starting its growth run.

One other positive recent development is the liberalisation of Chinese interest rates, which has been viewed well by the market. This interest rate liberalisation is part of a process towards a free-floating yuan. If the yuan was free floated today, it would significantly reduce the purchasing power of Chinese consumers through yuan depreciation, thus increasing the country’s trade surplus. Nevertheless, it would also increase the offshore debt burden of Chinese developers, potentially triggering mass government bailouts and a property sector collapse, driving Chinese growth to a halt under a worst-case scenario. To avert a currency crisis, China is likely to move towards a free-floating yuan in small steps, and it is unlikely to be a key factor in this current trade war.




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

New call-to-action