🔒 Alec Hogg: Why shocks rocking China are important for all SAs – not just Naspers shareholders

There’s a lot of transitioning going on in China right now, with significant implications for investors around the world. Mostly in valuations of Chinese equities. But also for the likes of Tesla, Apple and other market favourites.

The video from our partners at the Wall Street Journal explains implications of the Chinese Communist Party’s “common prosperity” campaign on businesses operating in the country. Most obviously, the direct impact on Naspers/Prosus whose valuation depends on the performance of 31% owned Tencent – a company in Beijing’s crosshairs.

South African investors not directly exposed to Naspers/Prosus shares should also be paying attention. The Cape-based duo’s heavy weighting on the JSE means they’re ever present in most retirement funds. In a different but related issue, the collapse of what was once the world’s most valuable property company also has a significant knock-on effect for SA.
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The Evergrande saga is brilliantly chronicled in the ‘Big Read‘ from our UK partners at the Financial Times. A lot of what I read in the piece came as a surprise  – not least the astonishing video below the headline of this month’s demolition of 15 unfinished high rise apartment blocks.

We learn from the piece that 29% of China’s economic growth has been driven by the property sector; and how the State-fuelled building boom has resulted in enough empty residences to house 90m people.

Let that sink in for a moment.

Apart from its testament to foolhardiness of central planning, also consider what that means for those supplying the construction materials: lower demand for minerals like manganese, iron ore, chromium, nickel and others SA exports at scale.

In the days of SA’s self-created isolation, local investment fundis often warned us that we were not immune to global events – when New York and London caught a cold, SA contracted pneumonia. The cities need to be updated to Beijing and Shanghai.

The Middle Kingdom is suddenly vulnerable to a virus created by economic mismanagement. And the folly of communism; the belief that bureaucratic worthies know better than markets. Brace yourself.

More for you to read today (click on the linked headline to access) –

* What if Inflation is here to stay? Are price increases transitory? Some of the factors driving them certainly aren’t.

* What science knows about the risk of Covid-19 transmission on planes. New research has uncovered when chances are higher, including during meal service.

* The six concepts you should know to be financially literate. There’s a lot of jargon thrown around, but financial advisors suggest starting with these six simple ideas.

PS  On Friday, Tim Modise will be hosting what promises to be a fascinating webinar examining the shift to remote work in the public sector. His guests include the heads of human resources at Eskom and Deloitte. Click here to register.

PPS The recording of yesterday’s Share Portfolio update webinar is now available. Click here to access: https://youtu.be/wV4pHLUJdRE


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