The US and China are likely to do a trade deal, reckons respected CLSA analyst, and author of the Greed and Fear newsletter, Christopher Wood. But if you’re after cheap stocks, the latter is the better bet, he tells Leslie Norton in Barron’s.
“The Chinese have had aggressive deleveraging in the past two years, which was all about squeezing banks. The Shanghai stockmarket was so weak last year because there was a lot of forced selling; 85% of it had to do with the messy deleveraging, and only 15% had to do with the trade issue.” The market has bounced strongly this year, but “on a two-year view, it isn’t too late to buy China. I’m staying overweight China… I own a mixture of value and growth stocks.”
As well as China, Wood is keen on India, which he suggests buying “on weakness”, particularly as investors fret over the outcome of the general election in April and May (Wood believes Prime Minister Narendra Modi will be re-elected.)
Politics is also key for investors in Europe. “Italy’s gross domestic product per capita is no higher than… during the formation of the euro. It went in at too high an exchange rate. Either the Italians need to leave… or the Europeans need… more fiscal integration.” If not, we could see “a confrontation between Italy and Brussels”. On Britain, “I think Brexit will be resolved”. As a result, he says, buy “UK domestic stocks – not the FTSE index, which is full of exporters. The risk on sterling is that it goes up, not down.”