Five Investment Themes in the Year of the Dog

Five Investment Themes in the Year of the Dog

5. Chinese Debt Growth Slows

The Year of the Dog is not without concerns – these come in the form of the Chinese debt mountain. Yet in our view, there is cause for positivity.

Asset markets are priced off three variables: the absolute, the change and the rate of change. Regarding Chinese debt levels, the first two are negatives for Chinese asset valuations. The level of debt – the absolute – in China is high, and it continues to grow (the change). However, the rate of increase (i.e. the rate of change) is clearly slowing.

In other words, the rate of change is now turning positive. In our view, this is an important trigger for improved market sentiment around the trajectory of growth for China’s economy, potentially providing asset valuation support, even though overall a slowing rate of growth is expected.