I was speaking at the MoneyWeek workshop at the World Money Show in London this weekend.
It was a good morning it's always great to meet MoneyWeek readers in person. And I also enjoyed the talks from Merryn, Ed, and Stephen Bland of The Dividend Letter.
My talk was on contrarian investing. I tried to give a bit of insight into how we view the world at MoneyWeek, and to talk a bit about some of the sectors and stocks that we find most interesting at the moment.
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For a market where many assets are ridiculously overpriced, there are actually a surprising number of interesting markets to talk about. And one that I didn't get the chance to discuss in detail has just announced some very exciting news.
China's epic challenge
China is making investors very uneasy at the moment. Its economy is slowing down, as we noted a couple of weeks ago.That's one reason why commodity prices have been in a slump for the past few years.
China's banks and level of indebtedness are another unknown quantity, particularly with its property market on the slide. The assumption is that the government will quietly keep the banking system afloat. But can it do that without any sort of crisis along the way?
Finally, the country is trying to manage a very tough transition going from an investment and manufacturing-led economic model, to one built on domestic consumer demand. That's an extremely difficult shift to make, particularly given that it cannot help but have a global impact.
And recent pro-democracy protests in Hong Kong have provided another reminder if it was needed that China is a dictatorship.
Given that consumerism is ultimately based on the notion of individual choice, it's going to be even harder for China to make that transition. If it wants to boost its citizens' consumption, it's also going to come under pressure to improve political freedom. That may be a step too far.
Expect a lot more money to flow into Chinese stocks
So there are lots of reasons to be concerned about China. However, there are also some good reasons to be excited as an investor, at least.
Stocks are still relatively inexpensive compared to their history. But 2014 is shaping up to be the best year for China since 2009. Why's that?
At least one reason is the promise of the Shanghai-Hong Kong Stock Connect. This is a trial scheme that will give overseas investors vastly expanded access to mainland Chinese stocks.
It's been in the works for a while. It was expected to launch in October, but that was delayed, and investors were starting to worry that the plan would fizzle out. But now the Chinese have confirmed that the link will start on 17 November.
Basically, it means anyone with a Hong Kong brokerage account can buy mainland Chinese shares. Until now, you've needed to have a special licence to do so.
The promise of a flood of money has already sent the Shanghai Composite Index up 17% this year. But we suspect the gains will continue as fund managers take advantage of the move and more and more overseas investors get involved.
Another bit of good news relations with Japan may be thawing
In passing, another bit of good news is that the top men in China and Japan finally sat down for a face-to-face talk about the tensions between the two nations.
China's president, Xi Jinping, and Japan's prime minister, Shinzo Abe, met for the first time. And they have agreed to restart talks on foreign policy and security, "that had essentially been on ice for two years", as the FT puts it.
Things have been rather fraught between the two major Asian powers, primarily due to a dispute over rightful ownership of the Senkaku Islands in the East China Sea (you can read the background to this here).
It's far too early to get optimistic about these things. As we all know, talks can quickly turn sour and the politics is very tricky we have two nationalist leaders who feel they can't afford to back down in front of their citizens.
But it's certainly better than being at each other's throats.
In short, given the money being drawn to the Chinese market and the hope of minor improvements across the board we still think it's a good time to have exposure to China.
If you'd like to order the audio from the MoneyWeek conference, here's how to get hold of it.
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