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China Watch – How’s it going with that reopening?

The China play has thus far not been profitable but I refuse to back down on my underlining analysis- Yet some reconsiderations are in order and it might be the start of a larger reevaluation. But for now the course of the ship is intact
2023-05-15

Main points:
1. Trade taking in water but we remain loyal to our analysis on a fundamental basis.
2. Exports looking exhausted due to the foreign demand looking increasingly bleak
3. Chinese consumers are still having fun and haven’t got the recession memo yet

During our latest Q&A session (We do one monthly for prime clients, so stay tuned for our next one in June. We will send out an email invitation soon) I received a question regarding our China position, which I thought deserved some wider elaboration.

The questioner was puzzled as to why we were long certain Chinese tickers amidst a global slowdown- the reason is that China domestically looks more attractive than the West given the asymmetry on the consumption side and has way more macroeconomic maneuver room with lower inflation, and an economy that is projected to expand considerably in 2023 while the rest of us are nearing the edge of the cliff.

But one thing is analysis another the trade. We aim at being completely explicit and open about our positions. Here is the performance so far:

Chart 1: Performance on China position:

The China play has thus far not been profitable but I refuse to back down on my underlining analysis- Yet some reconsiderations are in order and it might be the start of a larger reevaluation. But for now the course of the ship is intact

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