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Anonymous

18 Apr 2019

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Stocks

Would it be a better idea to invest in the US or China stock market in the long run ?

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Discussion (3)

What are your thoughts?

Hello there!

From what I see, US could be a safer place to invest in at this juncture. China is facing some issues with the domestic economy that could possibly make investing in China's stock market more risky (especially if you are investing in individual stocks)

1) China has a mounting debt crisis, and in recent times, there is an increasing trend of defaults in loan payments amongst corporates in China. This could be a red flag for investors given how these big corporates are not able to generate enough revenue to meet their debt obligations - increased risk and uncertainty of returns in the long term??

2) In addition to the first point, to deal with the issue of the mounting debt, the chinese government has introduced a deleveraging campaign, removing debt from the balance sheet of companies and tightening credit. Hence, companies may find it more difficult to secure loans/finances to fund their growth and expansion. This again, may dim the prospect and hurt earnings in the medium-to-long term.

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I will try to provide another perspective from Enk Loui's one...

  1. China stocks tend to have lower PE ratios, which makes their valuations more attractive.
  1. They also are less correlated to US stocks and therefore provide more diversification for international investors.
  1. There seems to be greater market inefficiency since retail investors consisted of 86% of market trading volume in 2016, with institutional investors and quants playing a more minor role.
  1. US Stocks seems to be overvalued, while emerging market stocks seems to be undervalued, based on both forward and trailing PE multiples.

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I would prefer US because of ease of investments and cash movement. Plus many too companies like Al...

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