Taiwan provides a useful way to invest in East Asian growth


The FT fund has recently achieved good returns because of the support for digital technology and green themes in the portfolio.

At the same time, the enthusiasm for recovery stocks is boosting more traditional industries and pushing up the overall global index. I have increased my exposure to this year’s rebound.

The fund also benefits from good exposure to Taiwan, coupled with deliberately not directly contacting any professional mainland Chinese funds. Although the Chinese market has been disappointing and has only risen 2.5% so far in 2021, the Taipei stock market has gained 19%.

Beijing does not seem to be overly worried about its stock market because it is fighting the more aggressive America.As it Celebrate the 100th anniversary Since its founding, the Chinese Communist Party has been wrestling with its own history and considering how to promote more prosperity and economic success. Investors asked whether this would bring them handsome returns.

Some people say that investing in stocks is about taking risks to enjoy the benefits of growth. Instead of fixed-income bonds, investors accept variable dividends and fluctuating profits because they believe that economic growth and moderate overall inflation will boost dividends and stock prices over time.

Shareholders should avoid the loss of capital due to inflation hitting the actual value of fixed income securities. Many investment managers try to improve the world’s stock performance by choosing countries and industries to invest in, or selecting individual companies that they believe will exceed overall performance and provide savers with higher returns.

In theory, if one economy grows twice as fast as another economy, then investing in the first economy should be a better choice, just like investing in meeting the ever-changing needs of technology and tastes. The industry should do better than those that are obsessed with obsolete products and declining sales.

Of course, in some cases, just like this year, some older and declining regions can provide good sharing opportunities because they have fallen too hard in the recent economic downturn. The rise from the bottom of the market may be fast, but it may be limited to revising valuations and may not be able to sustain it through superior growth.

However, if you look at what is actually happening in the market, you will find that the theory of greater growth does not always work. China is the most important case. For most of the past decade, the GDP of the world’s second largest economy has grown by about 6% annually, much higher than the growth of the world and/or the United States.

However, the Shanghai Composite Index, China’s major stock index, is today well below the 2007 high, and even lower than the lower and recent high set in 2015. In contrast, the S&P 500, a major US index, set a new high in 2007 and was 170% higher than 2007 in 2015 and this year.

The European Stoxx 50 Index is well below its historical high in 2000 and lower than its peak in 2007, but it has rebounded well this year and is currently higher than its 2015 level. Of course, the index reflects a slow-growing economy that was hit by the 2008-9 financial crisis and the 2011-13 euro crisis, so you can expect it to perform more slowly during this period.

The difference in performance between the United States and other countries is partly due to the composition of the index. China Index invests much less in large digital companies and the new economy, and invests more in finance and traditional industries. Like the EU economy, Euro Stoxx’s impact on the digital revolution is not high. On the contrary, there are many names in the fields of finance, engineering, automobiles, and consumer goods, usually in mature fields of activity.

The amazing expansion of digital giants at the expense of traditional retailers, media, and telephone companies has boosted the US index. Chinese companies are hindered by subsidized public sector competition and government intervention.

Some of them are also due to different monetary policies. In the past year, the United States has caused domestic asset prices to rise through large amounts of currency, and China has decided to be more cautious, comparing its desire to control currency, credit, and asset prices with the United States’ more accommodative approach.

Data from the past few years shows that the British “Financial Times” funds benefited from not investing in direct index trackers in major EU markets or China. Even in the past year, with the rebound in most markets, Taiwan has risen by 51.7%, while China has risen by 18.7%, while the United States has risen by 38.4%, and Euro Stoxx has risen by 26.4%.

On China’s national agenda, foreign investment prospects will not be better. President Xi Jinping’s vision for China is based on the belief that it threatens other countries to stay away from Chinese affairs and that China must be more technologically self-reliant.

On the 100th anniversary of the founding of the party, Xi Jinping wore a Mao-style suit and said that he did not want to criticize the excessive actions of the Cultural Revolution. At the same time, he positively commented on Deng Xiaoping’s reforms after Mao Zedong’s death, which allowed some free enterprises to flourish. In the next few years, there will be cold war disputes between the advanced country groups headed by the United States and the emerging world headed by China. This is not a good investment background.

Within the rules of the balanced fund, I will continue to use a portfolio that focuses more on stocks rather than bonds. The main battles I am focusing on are the monetary policy of the Federal Reserve and the spending plans of President Biden of the US Senate.

The market outlook still largely depends on how much stimulus the US economy will receive and how much it can do before inflation becomes a problem that the Fed cannot ignore. So far, the Fed has largely controlled this statement, but at the cost of having to raise interest rates early and accept the fact that inflation continues to rise.

Sir John Redwood is Charles Stanley’s chief global strategist. FT Fund is a virtual investment portfolio that aims to show how investors can use a wide range of ETFs to access the global stock market while reducing investment costs. john.redwood@ft.com



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