Mid Year Review (2) – Reducing Exposure to China / Hong Kong Stocks

I used to aim for 50% US and 50% China / Hong Kong for my overseas equities exposure.

However, since the beginning of this year, I have started to pare down my Hong Kong stocks as I lost my confidence in the Hong Kong and China economies.

China is still sticking to its Zero Covid policy and it is holding back its economic recovery. Unemployment is high and scary.

According to a South China Morning post in mid July. China’s urban unemployment rate was about 5.5 % and the worst was youth unemployment which soared to 19.3 % and is expected to reach 23% by end August. That’s almost one in four.

China is going to see a record number of 10.8 million university graduates trying to enter the labour market this year. All of us know that youth unemployment is a major issue and can be a potential spark for social unrest.

Disillusionment with the “Chinese dream” combined with lock-down fatigue is worrying.

I hope the China government can do something decisive and quickly to enable its economy to recover. A slowdown or a stall in the world’s greatest engine of growth in the last decade is not going to help anyone – inside and outside China.

Photo by Kaique Rocha on Pexels.com

Putting its internal concerns aside, its relationship with US is also getting from bad to worse.

The recent visit by US Speaker Mdm Nancy Pelosi brought that relationship to rock bottom. China’s refusal to condemn Russia’s invasion of Ukraine is not earning it new friends.

Years of efforts by so many people to build up the trust between the western world and China has been broken. I think it will be a long climb up from there. It is probably difficult to escape the eventual fate of a “bipolar” world.

I hope there will be NO war in Taiwan. If it does, the world in the next few decades would be very different from what we can imagine today. Climate change and keeping the world temperature rise to 1.5 degC only may NO longer be a priority and that is not good. Not good for humanity.

So, with such a pessimistic view, you can’t blame me for paring my Hong Kong stocks.

I am still holding a sizeable holding (15% of total equity holding) but I am NOT adding more individual stocks. I may still buy Hang Seng index ETF from time to time during times of weakness but it would not be a significant stake.

My loss in Hong Kong shares is almost 30%.

Any upward movement will just give me a reason to cash out.

I don’t know where the optimal % holding of Hong Kong equities is now. For a start, I would like to keep it to about 10% of my equity holding and a 25 / 75 ratio split for my Hong Kong and US stocks.

So, if I maintain my current holding of overseas equities, I would be buying more US stocks.

2 thoughts on “Mid Year Review (2) – Reducing Exposure to China / Hong Kong Stocks

  1. Hmm, not counting on the Oct/Nov CCP congress to boost economy & stocks?

    Personally I think now for China is small & mid-cap stocks in the industry areas that meet Xi’s preference. Unfortunately I don’t have any expertise in this area. And I suspect also many scam companies and pump & dump activities.

    But no longer the big well known companies & certainly not those relying on social media or social apps.

    Liked by 1 person

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