July 10 2020


There is some joy in free-riding, as long as it lasts. Markets have been on steroids since 23Mar20. Investors with long positions have witnessed the rebound, quite amused, others are trying to catch up.

What the market is doing short-term should not matter for long-term investors, for others they might want to notice that the developed markets are dilly-dallying within a +/- 5% band since mid May20, while Chinese market is going vertical. This discrepancy has a story to tell.

As an emerging market, China usually rallies in aggressive risk-on periods, which we are experimenting. Fair to say though, that fundamentals are on their side, with a sanitary crisis under control and fast improvement of both industrial and investment metrics. Not much more is needed for Chinese retails investors to feel buoyed by this positive backdrop. The fact that Jun20 home sales for the largest 30 developers jumped by 18% year-on-year is a case in point.

Also, in China as much as elsewhere, e-players have been putting up a share price performance, only to match Amazon’s 20% over the past month. Part of the rationale for the continued rally is that they are still trailing Amazon’s YTD20 share price performance by 25%. Here comes the sempiternal question: why Alibaba, JD.com, Tencent…etc. would not reach Amazon-like valuations?

Maybe they could, in a period where the edge is given to e-platforms that grab huge market share from the offline world. But in all things that are market, you might want to make sure that your swimming trunk is on before the tide goes away. To that end, diversifying your portfolio is always healthy, as well as taking some of your profits and buying calls. Think hedge.

360 Advisory – Markets