Most used buzzword... Uncertainty. More so than in previous years, investors are finding it difficult to construct a directional outlook. This is the corollary of extreme market volatility in 2014, and a series of unexpected and arguably inconsistent government actions. Uncertainty on the future encompasses:
· Uncertainty on the accuracy of official figures, particularly key metrics such as FX reserves & credit measures which are critical to making informed judgments on the vulnerability of the economy.
· Uncertainty on the reform agenda. Few doubt the government's dogmatism in pursuing reform, but questions remain on its likely pace and nature.
· Uncertainty on the government's ability to deliver reform in a manner that does not stifle economic growth.
Most bearish investors... International macro investors are the most negative on the Chinese market. International equity investors are also avoiding exposure, but are more nuanced as they can participate in pockets of structural growth. Local investors seem more constructive, and have more faith in the government's ability to manage the transition.
Biggest macro question... Will the RMB be devalued? Investors are divided between those who see devaluation as inevitable to maintain growth against the background of reform and imported monetary tightening, and those who do not. The latter group point to still considerable reserves, the willingness & ability of government to stimulate via fiscal policy, and the potential for competitive devaluations by other countries should they let the RMB fall.
Most discussed theme... New economy vs. old economy. Among equity investors there is a clear consensus to be long pockets of structural growth such as healthcare, education, leisure & ecommerce, and underweight resources, energy & capital goods. This has led to extreme positioning and valuations, and has likely exacerbated market volatility.
Most requested fieldtrip... Internet, closely followed by Consumer.
Most talked about stock... VIPShop. The leading flash sales company fits into favoured themes of ecommerce & millennials (in particular their desire for variety & value for money).
Brave contrarians... A few investors attempting to resist the temptation of the herd. Interesting, isolated suggestions include Macau gamers, asset managers, and property companies