Just Added to my Portfolio, and about China (19 Aug 2009)

Just invested another $10,000 distributed into the following 3 funds.

a) Legg Mason SEA Special Situations - $4,000
b) Aberdeen Pacific Equity - $4,500
c) ING RF Emerging Market Debt HC - $1,500

The China A share markets (Shenzhen and Shanghai index) has been going through a slump. They were down around 20% from their highs this year as of Wednesday 19 August 2009. It speaks volumes about China’s importance now that most Asian markets also followed China and fell on Wednesday.

I think its more sentiment driven rather than fundamentals. The China A share market itself has been going through a bull phase that started since October last year. In comparison, most Asian markets only started to rally and recover in March 2009 this year. There is an important difference between the China A share market and the Chinese economy. The Chinese economy is improving, without a doubt, just as the rest of the world is also starting to pick itself up from a recession. And the ability of China’s economy to continue to grow would have a significant impact on the rest of Asia especially since US’s recovery is likely to be relatively slow.

The Chinese stock market on the other hand, is a mainly closed market which only mainland Chinese can participate in. In this current 20% slump, some investors in China may get their fingers burnt, but much of it would be largely contained within China’s boundaries.

This is why the rest of Asia, though going through a certain correction now, is not going into a market crash the way the China A share market is going through right now. For me, personally, I believe the trend for Asian markets over the next 1 to 2 years will be up and we are far from the top of the market yet. So, any corrections within the market would be a good time to buy in on the cheap. Hence, I have just put in $10,000 more into my portfolio.

The stronger the fear in the market, the keener I get to buy more. And over the last few days, the fear has become significantly stronger. Will this be the exact bottom during this particular correction? I wouldn’t know, nor am I really aiming for that. I just think that it has fallen enough such that I want to add more.

P.S. As always, stay diversified even as you invest. Even as I add to my holdings, I am putting a small percentage into a bond fund.