Given how inexpensive Chinese stocks are at the moment, Kevin O’Leary of O’Shares Investments remarked that avoiding the Chinese market is “crazy” and “makes no sense whatsoever.”
He claims that’s because of the interdependence of the two economies, the anticipated extent of China’s economic expansion, and the likelihood that regulatory disagreements with the US would eventually come to an end.
“There’s an economic war, technology war, regulation war going on with the United States — that too could be temporary,” he said. “But frankly, these economies need each other, so to have no allocation to Chinese markets, makes no sense whatsoever.”
“To have no allocation to the world’s fastest-growing economy … is crazy,” he said. “You’ve got to stomach volatility.”
Following a dramatic decline in Wall Street indexes due to a higher-than-anticipated data for the U.S. consumer price index for August, Chinese equities fell significantly on Wednesday.
In Hong Kong, both the Hang Seng and Hang Seng Tech indices declined by 2.36% and 2.76%, respectively. Mainland Shanghai Composite dropped 0.78%, and Shenzhen Component dropped 1.25% in China.
Nomura and Goldman Sachs revised downward their estimates for China’s GDP in August. Nomura has lowered their outlook once more.
The ‘largest economy’ will be China
O’Leary yet stated that there is “no question [that] the Chinese economy, over the next 20 to 25 years, is going to become the largest economy on earth,” adding that “There’s no stopping that and no denying it.”
However, he referred to them as “noise” and recognized that there are numerous political difficulties with Chinese equities.
“I own China stocks. I have an index of them, particularly global internet behemoths, large companies like Alibaba,” he said.
“If you own Amazon, why don’t you own Baba — The same idea. The Chinese are using online services the same way — Tencent, others, they’re there because [their] consumers are demanding it.”