China’s Astronomical Economic Growth And How You Can Get A Share Of It [Chills 27 with Dr Wealth]
“China outdrank the world”. In the last decade, China has emerged as a global economic superpower as it underwent major growth throughout the country. Now, we see the Chinese influence everywhere and many retail investors are looking for opportunities to get a share of this pie. What do we need to understand about the Chinese market? What exactly is driving the massive growth in China and will it ever come to a stop? What are some risk factors when it comes to investing in China? In this week’s Chills with TFC, we invite Alvin Chow, the founder of Dr Wealth, one of the leading investment communities in Singapore to share his expertise and thoughts on the China stock market.
Unlike other major markets, the Chinese market is relatively obscure and unfamiliar to many. Reggie and Alvin provides a clear introduction to the Chinese market by dissecting them into 4 major markets. His explanation of China’s booming domestic consumption will also help you understand how China managed to achieve such astronomical growth within a short period of time. Topics related to the Chinese market like specific domestic consumption trends and the tech stocks vs consumer brand debate will definitely pique your interest.
Even as China’s influence and growth is expanding, concerns about its geopolitics and other internal risk factors still remain. How should retail investors balance these risks with the growth outlook in China? What is a good investment to start with in the Chinese market? Get Alvin’s advice by listening to Chills 27 today!
Reggie: China is one of the largest economies today and runs trade surpluses with all three of the major economies of the US, EU, and Japan… okay, four now, and the UK and many other countries. To be exact, hundred over countries run trade surpluses with China. What does that mean? It means that China sells more to them than China buys from them.
So do you want in on this interesting market? The Chinese stock market now has increased its access to retail investors like ourselves. So we had to bring on someone interesting to talk about this in more depth, to give us clarity on the broader financial ecosystem in China, the stock market, and some interesting investing ideas in the Land of the Dragon.
Expand Full Transcript
Welcome to another Chills with TFC session. In this series, we bring on interesting, relevant people to help us learn better from various perspectives. Life is not always about learning from people that you already agree with. Perspectives shape a rounder thinker in our pursuit of the life we love while managing our finances well.
Our guest for today is someone that proclaims himself to be a Doctor of Wealth. Yes, Dr Wealth is one of the leading investment communities here in Singapore. Today, we have its founder in the house to dig deeper into China, its financial systems and stock markets. So welcome Alvin Chow.
For reference sake, this was recorded on 8 April 2021 and we will be releasing these Chills with TFC episodes that we believe are very insightful and timely early to you Coconuts! Our discussion today is solely for education and entertainment purposes only. It does not serve as any form of advice or recommendations. Thank you for loving what we do and powering us financially to do more for you. Let’s roll!
So then you started investing in Singapore markets, right? Eventually, everybody moves and develop and go abroad and what not… in search of yield, in search of growth and what have you. So then, somehow we all make our way into China. I mean… you get the reality today. But what prompted you to explore this place in China?
Alvin: Because the way I see it is that the big picture was when I looked through history, is that the world’s superpower always changes. It’s never one country forever. So it started with the Portuguese who really sail around the world and colonize other countries. In the past, before they get to be naval powers, usually they only move around the land mass. So you only concur your neighbors who are connected by land mass. But the Portuguese brought a different story. They had these ships that can sail as far as Brazil, Macau that became Portuguese colonies, and then the Spanish, and then the Dutch, the French, the British which Singapore was part of a colony. And then after World War Two it is the US, there’s also power.
But interestingly after the World War Two, the interesting part about US is that it doesn’t colonize. But how do they then dominate the world? How do you call it a superpower when you don’t plant flags in other countries? How they do it is they infiltrate to your country using their businesses, using corporations or what we call MNCs, multinational companies.
Today you can go to any country, you usually will be able to sense or see or witness American company that’s there. I do think that eventually US would not be the superpower. So who is the likely next country? And that itself, the clearest answer will be China, so that piqued my interest. When I looked deeper and looked at the trends, then I felt more confident that on a larger trend scale, China is the way that… or an avenue that is good to place some bets. It’s not good to not place any bets on it on the contrary. That’s where I really started to put more money in China stocks for the last past few years, I would say. Now, majority of my portfolio is weighted to China.
Reggie: Nice. So in the pursuit for yield, you’ve explored China. But then there are the common sentiment that the Chinese have a relatively closed market. Can retail investors actually participate in it? I’m sure you’ve done it, so how do we go about doing it? And, what’s the idea here?
Alvin: First of all, it’s not about yield, it’s more about the growth prospects. So it’s more capital gain. In China, there are three major markets, or I should say four major markets where the Chinese companies are listed on the exchanges. Domestically, it will be the A-Shares which are listed on Shenzhen and Shanghai stock exchange. And then you have the H-Shares which are listed in Hong Kong. And then you have the ADRs, American Depository Receipts that are listed in the US. The more well-known companies from China will choose any of these four exchanges to list. And US, definitely no problem, I think a lot of investors are very familiar with, as well as Hong Kong, investors have access to these two markets for a long time.
The thing is that for A-Shares, foreign investors used to be forbidden from owning A-Shares. Only until around 2014, they open it up. How they do it is that they had this Shanghai – Hong Kong Connect and Shenzhen – Hong Kong Connect. So what they are doing is that they are making use of Hong Kong as an international platform to reach out to foreign investors.
Of course these are their backend stuff, we don’t need to worry so much about it. On our side, we just need to know whether our broker get access to these A-Shares. There are quite a handful of brokers even in Singapore, based in Singapore, they allow you to buy A-Shares. Just need to check with your broker, it is no onger that difficult. And we are talking about probably 2,000 stocks in Shanghai, 2,500 stocks in Shenzhen, about 2,500 in Hong Kong. Add together you have about 7,000, that’s excluding the US ADRs. It’s a very huge market to talk about.
There are some stocks that are only listed in A-Shares, as A-Shares. So if you don’t buy A-Shares, you’ll never…
Reggie: You’ll never get the full suite of stuff.
Alvin: Yeah, exactly. Especially some of the consumer products companies that are mainly listed in the Chinese and I think that this is where the potential is. So enlarging that scope of China companies make a lot more sense.
Reggie: What is your percentage composition like in terms of being in China? How many percent of your portfolio is China now?
Alvin: Currently it’s about 60%.
Reggie: Wow! Predominantly in consumer consumption? Or where are we at?
Alvin: Mainly in consumer products. Because I think as a retail investor, it’s easier to understand the consumer product being a consumer myself rather than those B2B companies where it’s a lot more opaque, if you are not an industry expert. The second reason is also because China’s domestic consumption has contributed to GDP (Gross Domestic Product) more than 50% of it already. It’s unlike the past where they rely a lot more on exports.
Now, consumer domestic consumption is a major thing that drives the economy. That’s where China also talks about the dual circulation economy, having both export and domestic consumption. That’s what they want to grow. So I think that there is a lot of growth area to look at. And given the Chinese super big population, domestic consumption is going to be much larger than what we have seen in the US.
Reggie: Domestic consumption is a very big word in that sense, that people consume all sorts of stuff and all sorts of things… and China is a huge country. So just give us some texture, help me understand which part of consumption, how do you see consumption habits change? The general idea out there is… China a lot of people, country growing, grow, consume more… Okay, I get it. But then where? What is it like? What are the habits going forward?
Alvin: Let’s bring up an example, would be Maotai.
Reggie: Maotai, I hate that thing.
Alvin: So I guess you guys have heard of it before. I’ve never drank it before!
Reggie: But it’s very expensive.
Alvin: It’s very expensive, I think it’s at least SGD 300, one bottle.
Reggie: And that is the cheapest one.
Alvin: That’s the cheapest one. And to show you the scale of that consumption, this Maotai is a part of family of Baijiu. It is not the only brand, but it is a major brand in China. Of course, there are second tier like Wuliangye. But Baijiu is a very big market. Baijiu is mainly drank in China, not outside of China. It’s unlike your Whiskey, your Vodka, is drank around the world. In terms of hard liquor consumption around the world, Baijiu is the most drank spirit in the world.
So that means China outdrank everybody else, practically by that logic. So that shows you how big their consumption is… to give you that scale. So this is a good example of a consumer product that I like. It’s the first stock that crosses the 1,000 yuan per share, now it’s 2,000 plus. It also has this national title, The National Liquor, which was bestowed by Mao Zedong. This kind of branding you can’t take away. Even the water is a special source that comes from that particular part of the stream.
Reggie: In Guizhou, some weird little part…
Alvin: Yes, correct. They tried to take water from upper part of the river, lower part of the river, it tastes different. So there is a lot of this kind of competitive advantage, this kind of branding, when you want to have a very big occasion, celebration… you put a Maotai on a table, on every table. It gives people a lot of that face value. In China, Chinese have this face value. They want to increase this if they can. And this is one example, right? So it will never go away. And as the Chinese become more affluent, they will consume more. Vices always work.
Reggie: So that’s the cultural aspect from its core. But like you said, consumption will increase as the consumers can buy more essentially. But with the undertone of understanding how the consumer economy circulates in China, how are we seeing that consumer becoming more powerful in that sense? And because your base case of pursuing Chinese stock is for growth. But then if something like a Maotai… I know you bought it a lot earlier, but something like a Maotai is already established and biggest liquor brand, and it’s mostly consumed in China. So then where’s the growth in that sense, other than local consumption?
Alvin: For the record, I don’t have Maotai. Because I always felt that it was very expensive. When I looked at it, it was like 1,000. So I thought it was expensive. But it’s a foolish mistake because it went to 2,700.
Reggie: That’s the whole growth thing.
Alvin: In hindsight, sometimes for good growth stock, you just have to buy a bit more. It looks over valued, but sometimes you have to get it some point in time, otherwise it would just get more and more over valued over time. So that’s a good question, where are we going to get the growth?
So Maotai is mainly drank in China. One is that, there’s a few things that the company can increase its revenue. One is they can increase price and that’s what Maotai did for many years.
Reggie: It only gets more and more expensive every batch.
Alvin: Limited supply because they can’t make a lot and when the demand goes up, the price goes up. And because they are more affluent, they can afford. In fact, it become a veblen good. The more expensive, the better it is, the more face value you can derive from it. That’s one part of growth, that’s… increase prices. Usually that’s the fastest way and that’s also the highest margin way. Your cost is the same…
Reggie: Assuming all else stays constant.
Alvin: Then your price goes up by 10%, 20%, right? You straight away increase your margin. There’s always the lazy way to grow the business.
Second is that I do believe that eventually China will export their influence to other parts of the world. Even you realize now, we go around Singapore coffee shop, you see 麻辣香锅 (Chinese dish prepared by stir frying, strongly flavored with mala) popping up here and there, people are consuming that. If you look at history, Japan… when they export their electronics throughout the world, they don’t just export their products, they export culture. That’s where we start to watch animes, we start to eat sushi, all your all these kind of Japanese culture start to filter in. Companies don’t just bring products, they bring along culture and that infiltrates and changes, or mash together into a melting pot of different cultures.
Korea did the same thing. They didn’t just sell Samsung phones, they give you KPOP.
Reggie: KDrama and ruin every single person’s probability.
Alvin: Exactly right… so I do think that China will eventually bring more and more culture here. For all you know, Maotai will increase in consumption outside of China, and that’s a much bigger market. That’s why we talk about that superpower status, that MNC effect, that cultural imports or exports from China. US did it a lot, especially the Hollywood culture… all these kinds of things. Infiltrates the music, Spotify, a lot of China music. Last time Chinese music mainly come from Hong Kong, Taiwan. Now it’s coming from China. So that is what I see as inevitable.
Reggie: By the way in China, they don’t really eat 香锅. I have not really seen 香锅 while I was living there. Not in Sichuan, not in Chengdu, not in Shenzhen.
Alvin: It’s an evolved dish.
Reggie: Like Mookata, it’s the same idea.
Alvin: Even chicken rice here is different from the 文昌鸡 (a type of chicken breed and a chicken dish from the Wenchang city area) in Hainan. It’s different. So there’s a little bit of bastardization.
Reggie: It happens, it happens everywhere. So shout out to all you 麻辣香锅 fans. But then in that sense of… that is one kind of consumption trend, the premiumization and essentially people become more affluent, they want the status. So that’s one kind of consumption. What other consumption trends are you looking at? Without… you can don’t drop names, but just kinda see where this is going.
Alvin: Plenty. So the clue is what you buy every day and what is in your home? One company that I like is the air conditioning company, home appliance company. But they are known more for their air conditioning. They are very successful company in China, number one in terms of air-con sales. In China, they are busy building a lot homes. And now they want thermal comfort, they want higher standard of living, and they all want air conditioning in their houses, just like us in Singapore. But the number of houses they have dwarved us totally. So that means the demand for all these air conditioning is huge. That makes them one of the largest enterprises in China.
They also do commercial spaces, not just the domestic one. Like our Jewel, Changi Jewel, they chose Midea as their air-con provider rather than any other brands. That says a lot. That means that they are pretty successful in also growing outside of China. Now you start to see a lot of advertisement on cabs, on busses. You can even buy a Midea air-con today at any of the major electronic home appliance outlet. So this is another thing you can look at. Because in terms of air-con players, there aren’t many in the world. Not as many as other consumer products, I would say. So competition is not that strong.
Reggie: I think they have managed to brand themselves unlike a Chinese company. So the very Japanese vibes, the way they build it. I think quite interesting the way they ride through global cultural acceptance because there’s still that little tinge for it. So then in that sense, a lot of people when they look at buying Chinese companies,the big names always come up… Alibaba, Jingdong, whatever, and mostly tech platforms which are popular everywhere and they have that kind of reach. But then you’re going for very real, like consumption, very core appliance kind of stuff, right? What is that divergence or do you also own the tech guys?
Alvin: I also own the tech like Alibaba, Tencent, the likes of it. Of course, if they are trading at a good price, which Alibaba is.
Reggie: Not a tip guys! This is purely for education purposes, please don’t take it as advice.
Alvin: It’s just that I find that consumer brands are stickier whereas tech, you really need to keep up. The innovation cycle is very short. You talk about Tencent being the social media champion in China, then suddenly you have Kuaishou, you have Douyin. Just like less than 10 years of dominance, you suddenly have new competitor threatening it.
Reggie: Weibo used to be a thing, it is still a thing, but finances it looks like shit anyway.
Alvin: So it’s getting more and more crowded now. Whereas in the consumer branding space, it’s very, very difficult for a newcomer to come in. Very difficult, not impossible, but it is very difficult. Like how are you going to create another Baijiu brand to beat Maotai? Very tough, right? Charlie Munger used to say this, that the mouth is a very sensitive place. You know you don’t put foreign things in your mouth.
Reggie: Foreign things in your mouth…
Alvin: Exactly, very sensitive. You won’t anyhow put things that are unfamiliar.
Reggie: That you don’t like in your mouth.
Alvin: So if you are used to one brand, you will keep having a brand. Not a sexual thing, no sexual connotations.
Reggie: Yeah, we profesh! Sweat!
Alvin: And things like Maotai are harder to change, because people are stuck to it whereas you switch a platform might be easier. There are a lot more, like soya sauce, it’s also something that I think is integral to the Chinese culture. Something like a Haitian brand is also very sticky. People always seek that kind of familiarity. If they buy that kind of soya sauce, likely they’ll keep buying the same soya sauce over and over again, they wouldn’t change.
Reggie: What you’re telling me, all these consumption brands, essentially consumer driven companies, they are mostly listed as A-Shares in Shanghai and Shenzhen. That’s what I’m getting. You don’t get it through the ADR listings, which are in the US, you don’t get it in Hong kong.
Alvin: Maotai is only A-Shares, Haitian is A-Shares, Midea is also A-Shares.
Reggie: So in that sense, it is a discussion between access and not so much in terms of what are the risk factors, because people get a little bit jittery in the idea that, oh, invest in China then you’ve got a hole in Renminbi and all those kind of stuff. So give us a little bit of texture to understand, where do we find comfort in this? Where it is relatively still a close market, in terms of the currency and the financial markets. Why are you so okay to put 60% of your money in China in that sense, other than the growth story and all those?
Alvin: Currency exchange risk will always be there. Even let’s say you buy a Singapore company, but it has businesses in China and US or whatever, you will still get the currency risk. Just that it’s embedded in a company. You don’t feel it…
Reggie: Not as open.
Alvin: You don’t feel it, but it doesn’t mean it doesn’t exist. So that’s one, you can never eliminate it. Second is that it’s the same if you invest in US companies. Predominantly. I do know there are some people who just whack everything US. So you get the US currency risk as well. But I think for major currencies, like USD, Renminbi, or even Euro, there’s no need to be so fearful about it and also you don’t need to hedge it. Because the way I see it is that the good thing about Singapore dollar is it is hedged against a basket of these major currencies.
How MAS (Monetary Association of Singapore) does is they manage the exchange rate with a basket of currency, which is not disclosed, but they did give you a hint. They say it’s against major trading partners. China is definitely one of the major trading partners of Singapore and that means Renminbi is going to be quite a big weightage in SGD basket. That means that I see it as MAS has already hedged it for me. I do not need to do extra hedging.
When you look at the history of Renminbi versus Singapore dollars for the last 20 years, it has been very stable [indiscernible] So that tells you that… that can assure you that it’s not going to be a problem in terms of currency exchange risks. And if China is going to be the major economy or the biggest economy in time to come, the currency is going to be more important. In fact, you look at the reserve currency percentage, Renminbi has been growing the fastest, compared to the rest of the currencies. So I do think that it’s not a big concern for me.
Reggie: Fair, okay. Essentially you’re not concerned because you feel like MAS has already done the balancing act with the basket, weightage kind of thing. But then, hedging is a thing that is being thrown around. People keep saying, you’ve got to hedge. I’m just curious, how would you hedge if you want to hedge? Because there are all these tools out there but not all are open access to retail guys. I want to get a little bit of your take. If I’m a retail individual, I want to hedge against a certain thing, what will you do?
Alvin: First of all, I don’t encourage hedging is because it’s very complicated. Most people do it wrong and they end up losing more money than when they have not hedge at all. But let’s say if you really want to hedge, one of the easier way is you short Renminbi. There are a lot of forex brokers out there. So we can think a portion or position to shot against Renminbi. If Renminbi really devalues, then your shot position will make money. So that’s how you hedge against currency risk. But it’s very dynamic, your position sizing must be calculated well and you need to adjust that position regularly. That’s why it is a nightmare, most people will just do worse, so don’t bother.
Reggie: So don’t bother, just take a break, let MAS do its thing. Okay, that’s cool. You know like in all big countries much like China or US, or anywhere, growth is not consistent. A lot of Singaporeans think that everywhere is the same. “Everywhere is the same, growth is homogeneous around”… but in China, there’s a lot of coastal cities. Those are the big consumers: Beijing, Shanghai, Bei Shang Guang, essentially these three places, and Guangzhou. Are you concerned about their consumption habits and how that trickles differently into the inner cities that are non-coastal? How do you see that play out, in terms of trends and all?
Alvin: Definitely the consumption is mainly from the coastal area, besides the three cities that you mentioned there are many other cities, your Hangzhou, all these places… even Foshan. They are pretty high in terms of their living standards.
Reggie: Foshan… is the, who’s that…
Alvin: Bruce Lee!
Reggie: Yeah, and Wang Fei Hong.
Alvin: Exactly, so a lot of gongfu stuff there.
Reggie: A lot of gongfu stuff, yes.
Alvin: They have many big companies, Midea is from there. They have very successful enterprises businesses and their overall standard of living around those areas are pretty high. It’s not that low. And they’re also building or designating areas like the Greater Bay Area, the GBA. They’re going to have a metropolis connecting all the cities together, to make use of multiple cities to grow to a bigger region like San Francisco Bay Area, Greater Tokyo Bay Area. They steal that concept from…
Reggie: This bay is way bigger, just saying.
Alvin: Yeah, exactly. So it’s way bigger.
Reggie: It’s like five cities string together.
Alvin: That means that even… actually I think it was about 13 cities. And that means that the coastal areas still have a lot of growth. I think that in fact, the most of the growth of China will still come from coastal area. Unlikely it is going to come from the inner cities. Which means there is a problem of rich poor gap. In China, it is very stuck. That’s a funny thing, right? It’s supposed to be a communist country, but the rich poor gap is wider than US, which is a capitalistic society. So that’s the irony, right? I dont know how they are going to solve that. That’s beyond my pay grade.
The inner cities does have some economic development, is not without. Like Kuaishou has brought a lot of the influences from the inner cities, and they also tried to have that kind of supply chain where farmers in the inner cities, western part of China can transport or sell their crops to the coastal area. And they also have like sister cities. They match one inner city with a successful modern city, and then they try to work together, see how they can bring them out of their poverty. So that’s what they’ve been doing. I don’t know how successful it is going to be, but I do think that majority of growth will still come from the coastal area.
Unfortunately, that’s how it is. The rich gets richer. They have more resources to grow and all these GBA will just increase the activity. Eventually when tourism comes back, people will still visit the coastal cities more than the inner cities. So that’s how it’s going to be. But China may have a very bad rich poor problem to solve.
Reggie: On the grounds of rich poor problem and it being very bad, because the picture now that you are painting, and a lot of people are painting… Maybe not everyone, maybe mainstream media not so nice to China, but if you look at the numbers, you look at the financials, if you trust the data, a lot of growth, a lot of prospects and things are looking good.
But then what are some of the risk factors? Like one of which is the rich poor gap. That creates instability from a social ground. What are some of these risk factors that you think people need to be very cognizant when they invest in China? How is it different?
Alvin: The thing that is bugging China, if you bring in the context of US, is that China domestically they are not that stable, they have flashpoints because they are not as homogeneous as the Americans. Why I say that because Xinjiang has always been a problem. Ethnically, culturally, they’re different. They’re not homogeneous at all. It’s almost like it’s another…
Reggie: There are more Turks than Chinese.
Alvin: Somehow they are in, within the boundaries.
Reggie: Not somehow, it is war.
Alvin: You have to assimilate them to do, but you cannot force them to change their culture. It’s not possible, change their religion, that’s one area. You don’t have such problems in the US. Tibet wants to be autonomous, don’t want to be under the Chinese politics, Taiwan is also a problem. So you can see they’re all around China, at the fringes of China. So in terms of all this kind of political instability China is not as well positioned as the US, all the states are pretty much the same.
Another thing is that their neighbours are not friendly. Chinese neighbors are not friendly. India is not friendly, they have Kashmir. Japan, not in good terms…. a little bit of frenemy kind of situation. Sometimes I’m friends, sometimes I’m enemies with you. But definitely I won’t trust you.
Reggie: Like trading partners, we can trade. But we are not friends, we are not allies. Yes.
Alvin: Vietnam, Vietnam hates China. So you can see again, it’s around China. So that means that if let’s say China goes to war, it has a problem because everybody surrounding China is a foe, almost. Only the Western part, the central Asia, they have more friends. Other than that, everybody surrounding them, they are enemies. So I always love to say that China have friends afar, but foes nearby.
And in US, it is different. Friends up north you have Canadians. Friends down south, Mexico. They’re all dying to go into America and they are protected by your Pacific Ocean, Atlantic Ocean. To attack US is very difficult, right? To attack China is a lot easier because you have a lot of enemies waiting to let people use them as avenue or conduit into attacking China. So you can see that in terms of geopolitics, this is one major risk I see in China.
It’s not as solid in terms of securing a home-based defense as what US has experienced. That is why the biggest threat to US territory in the past hundred years was only probably two times. First was during the Cuban missile crisis where the Russian nuclear bomb was within range of the US launch. And that’s why they’re so uptight about North Korea, because they are claiming that they have a missile range that can hit the US. So they are very clear what the major threat is, all this inter-continental, ballistic nuclear bombs. That is what threatened them. It’s not all your traditional Naval forces, not your land forces, they are impregnable from that point of view.
Reggie: Think they have what… 30 huge ass aircraft carrier.
Alvin: Exactly, and they’re protected by the oceans. Oceans are flat, your radar can see forces way before anybody else. The second time the US faced a threat was terrorist, where they flew a plane and hit America.
Reggie: I don’t think that’s a threat, that was like just… it happened.
Alvin: But they want to prevent this from happening. They really whack the Middle East. So you can see the whole US focus where their defense is. It’s about neutralizing all these long range threats that is hitting their soils. Other than that, traditional military force would find it very hard to touch US, but China is a different story.
Reggie: Okay, fair. So that is the external force, right? Which I get it, like what you brought up, in a very brute manner… All the enemies around, a lot of trading partners, no friends. But then from an internal cultural standpoint, from a political standpoint, what are some things that if I actually want to invest in China, what do I need to know?
Because we know so much about what’s going on here. We know a little bit more about what is happening in the West, like how they do it, because media… they talk about it, but then if today, as an investor from Singapore, when I look at China, all these growth stories… but what are some nuances that I need to know there’s different?
Alvin: Definitely the value system is different, political system is different. The thing about investment is that it’s very difficult to be a hundred percent impartial, a hundred percent objective. We will bring in some of our biases, our value system into the kind of investment that we do, it’s natural. And the thing that a lot of people have with China, the problem is they don’t like a communist government. They feel that they control everything, a lot of censorship. That is a value that is in conflict with the Americans. Americans is… “I want liberty, right? I want freedom of expression, you can say whatever shit you want. I may not agree with you, but you can say it”. It is acceptable that you can say it. But in China it is not, if you say something that I don’t like, I will censor you. Different culture, whatever.
Reggie: Like Winnie the Pooh.
Alvin: So to some investors, probably their value is closer to the Americans. Like the freedom of speech must be preserved, I should not be shut off. When they look at China, they say “this is a criminal government, I don’t like them. I’m not going to invest anything about China”. So that’s what I mean, you bring in your personal value into your investment process. I think this is natural, you cannot prevent this. Because if you go and invest in it, you will hate yourself, which is a very unnatural thing to do.
I do think that there’s a lot of misunderstanding regarding this, even when we talk about this freedom of expression, it’s not just a political system thing, but it’s a cultural thing. Because the angmoh has this culture that… individualism. They really see the importance of having that individual. After you reach a certain age, you’re supposed to kick him out of the house and he’s going to live on his own, that kind of independence. Whereas in the East, during the Confucian period, that kind of culture has been fostered that you are supposed to live in harmony, you’re going to respect elders. You don’t say things that people don’t like to hear in protecting the harmony in the group. So you see it manifests into even the entire country, into the political system as well.
So that means that when you look at Chinese companies, you have to evaluate their behavior based on Chinese values. If you use American values to evaluate Chinese companies, then you will find a lot of conflict. But actually to a Chinese, this is the way, “this is my way of life. Because I don’t know, thousands of years… it passed down from my ancestors, that’s how we supposed to behave.” To the angmoh, this is not acceptable. This is suppression.
Same thing. If you use Chinese values to look at American companies, it’s also wrong, you will have a lot of conflicts. “Why are they so aggressive? Why are they borrowing so much money? How are you going to pay back? They’re not prudent at all. Why are they doing all these? How you say this kind of things on media, on social media without filtering, this is very irresponsible.”
You have very different kind of opinions coming up. So basically what is happening right now, all these US, China trade war, it boils down to a difference in value… really to the core, to the root of the problem. They were just brought up differently for thousands of years and now they are vying for that top spot. Which means when you get to the top spot, you get to propagate your values. That’s what they cannot accept and that’s why you have all these arguments. I do think that if you really want to look at Chinese companies, you do need to look at them or evaluate them based on the Chinese system, the Chinese values, then you will have a better appreciation.
Reggie: Nice. So if let’s say I want to start investing in China, how would you recommend that I go about doing this?
Alvin: Read Confucius, Analax. Of course the easiest way is always buy a fund that invests in China. ETFs (Exchange Traded Funds) has been a very simple and assessable way for most people. Like I-Shares MSCI ETFs is pretty broad, it covers all the four markets we talk about, whether it is US ADR (American Depositary Receipt) shares, A-Shares, it covers everything. So you can just buy one ETF and solve everything. You have your Maotai, you have your Midea, it’s all inside.
Reggie: Cool stuff, thank you. Thanks for coming. I hope you guys learned some good stuff today and by the way, Winnie the Pooh is reference to Xi Jinping. If you didn’t know, you can search about it. Winnie the Pooh is being banned in China.
Alvin: This podcast can never be broadcasted in China.
Reggie: Yeah, because we use Pooh. Anyway, take care, have a great day. Bye guys.
Alvin: Thank you.
Reggie: Hey! I hope you learnt something useful today and I truly appreciate that you took time off to better your life with The Financial Coconut. Knowledge is that much more powerful and interesting when shared, debated and discussed. Join our community Telegram group, follow us on our socials, sign up for our weekly newsletter. Everything is in the description below. If you love us and want to help us grow, definitely share the podcast with your friends and on your socials.
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I have three questions that I ask every single guest. The first question is, what is a core life principle that you hold on to?
Alvin: One principle that I hold on to is that just do it first, then think about it later. So it’s almost like fire first then adjust later. I know a lot of people will say “plan something then after that you go and execute it”. I think it depends on what kind of personality you are, but for me I tend to be the more cautious kind. One principle I hold dear is that I always remind myself, I must act fast enough, don’t think so much. I tend to… what if.
Just do it first. Sometimes it’s not as bad as what you think it’s going to be. So that is one principle that I really hold on to, and I think that a lot of things in life, in business especially right, even now the culture about being an agile company means you go and do first then you keep iterating. Don’t be like… very traditional company, you plan, work plan, after that still got sub-planning committee. Then you come back together with another big plan. After six months, nothing is done on the ground, you’re still planning. By the time you roll out something, your competitors are already out there selling their products.
Reggie: Okay, cool. Take action. Number two, what is a personal finance advice that you feel needs to be further propagated.
Alvin: I think it relates to the first principle that I mentioned about, just act first. I think a lot more people can invest more. A lot of people can care about their finances more, but I know that it’s not natural. Because we don’t wake up to say that I want to buy insurance today. I want to invest my money with you. We wake up, what should I eat today, where shall we go today, where shall I play today?
Reggie: If I wake up and… hey, what insurance should I buy today, it’ll be quite funny.
Alvin: Exactly right! So that means that, you just want to get it sorted out as soon as possible. I just go and act on it and you can just let it run in the background. But the most important, if you do it first, if you wait until 10 years later then you act, usually people will say “I should have acted earlier”. And sometimes we meet some of the investors, they are like retiring age or near retirement age, like 50 plus. And they say “hey, I haven’t start investing”. Time is a very crucial factor for investment to grow and having less time, there’s very limited options.
Reggie: Nice. Last question, which part of your life are you giving additional focus on now?
Alvin: I think definitely the business part a lot more because as I shared truth and story, things have become more and more serious and I have to really concentrate and focus on growing it to keep everybody happy. Customer happy, staff happy, shareholders happy, then I’ll be happy. It’s really focusing a lot on the business, a lot of my day to day life.
Reggie: Nice, that’s cool. By the way, for all you who don’t know, because you probably can’t see, Alvin came in crutches. Thanks for coming in.
Alvin: No worries, life goes on.
Reggie: All of you, all the best. Take Care.
Alvin: Thank you.
We see them on the streets everyday. Everyone wants one but only some get to own them. Cars – Did you know the cost of car ownership is not just Certificate Of Entitlement (COE), purchase price, fuel, and parking? Are you 100% sure you are ready for car ownership, or should you be owning a car in the first place?
Credit cards – almost everyone has it, with many having multiple cards. Everyone who owns it knows the general function of swipe it now, get your goods/services and worry about payment later when the bill comes. But is that all to it? Many are confused on which card to apply for. Which card is best for a certain occasion? Are they giving you the benefits you seek or are they brewing up a storm in your finances?
Buy Now, Pay Later: How Does It Work? [Chills 34 With Hoolah]
The advancement of technology has given rise to a number of innovative fintech solutions and one of them is Buy Now, Pay Later (BNPL) where consumers get to buy products without having to pay the full price upfront. Instead, they pay zero-interest instalments over a period of time. How does this actually work and what are the possibilities for both consumers and merchants? Could BNPL spell trouble for consumers who might overspend, or is this an opportunity for others?
This is a special TFC Chills x Stock Geekout (SGO) episode as we give you a sneak peek into an upcoming SGO episode! Together with Thomas Chua, founder of SteadyCompounding.com, we deep dive into one of the most promising companies in the current market: Sea Limited. This is Part One of the SGO episode where we analyse Garena, its gaming arm and also its cash cow as it produces more than 90% of Sea Limited’s revenue. How is it possible that a mobile game is able to fuel its other businesses – popular e-commerce platform Shopee and FinTech business SeaMoney? What sets Garena apart from its competitors? How should we assess the sustainability of Garena’s business?
Investing is not just about stock analysis. Studying the economy as a whole, also known as the macro economic view also plays a critical role in your investment decisions. Does the US-China trade war affect the two countries only? What impact does inflation have on our portfolios and how should we plan for it? In this week’s Chills with TFC, we invited Freddy Lim, CIO of Stashaway to dissect these macro ideas in detail. This is definitely a must listen for those who are not so familiar with macro ideas!