Jim McCafferty: Financial management amid uncertainties
Updated 08:03, 06-Sep-2019

It's a challenging time for investors as a host of factors make the global economy look shaky, said Jim McCafferty, joint head of APAC Equity Research at Nomura on the sidelines of Nomura's annual investor conference in Shanghai.

"Almost 300 people in the audience in Shanghai are asking how likely is the globally recession. And most of the audience feels there will not be a global recession," said McCafferty.

"Why did they feel that way? What is driving the globally economy, the big country, Japan, China and the U.S.? They are not isolated from trade wars but they have got domestic resilience to it. So take the U.S. for example. The consumer is still quite strong," McCafferty explained.

"Take China. The second biggest economy in the world is still growing five percent GDP growth every quarter. Take Japan. The transience of two quarters of GDP decline(d). We think it is quite unlikely. And investors retell the same thing."

Screenshot of CGTN's Global Business

Screenshot of CGTN's Global Business

Even there is not going to be a global recession, we cannot deny there are risks still there, so what is investors doing hedge against risks? We just had agent company release survey first time for example which is the period end in June 2019.

McCafferty noted, "What we see is Chinese companies' quiet resilience enough to what happened in the world. Recently, for that most of Chinese companies are focused on domestic consumers, because many companies only serve Chinese market. The evidences show quiet resilient to what happening globally, so what we're finding is investors actually to China is actually becoming a hedge."

"Much of that is because we are seeing Chinese valuations at 12 or 13 times earnings. In the U.S. the equivalence is 19 times, so I think fewer global investors, you got two investment options have some money in the market, where do you put it, we will switch the U.S. stick into China."

Now how much attention we should pay a lot of stressed factors which we see in the moment, like Brexit, economic worries, the trade war?

"There is a lot of noise there, political posturing, twitting going on which make people very jumpy, so what you can do to go back to the fundamental. You go to the company themselves and stock market what they are saying," McCafferty pointed out.

"They are saying consumers in the better ship than a lot of noisy suggestions. Chinese companies grew 15 percent this year. At same time there is a very strong balance sheet. You can use strong balance sheet actually buy share to stimulate stock market, so we are quite optimistic."

From an economic perspective, stimulus as one of the factors that's going to be critical to maintaining Chinese economic growth in a face of external facts.

"I think another thing which is important is confidence. How do you get people's confidence? Get them a well solution," said McCafferty. "If you got a rising stock market, people got feel like to spend money, same thing property prices. With high property market price, people go out and spend money on big items." 

"That's what I think Chinese perspective, the government can influence, the government major shareholder use their shareholder register to actually stimulate companies to share push the value of stock market," McCafferty concluded.