Reinhard Panse's Perspectives
Reinhard Panse's Perspectives
Podcast
30.11.2022
These lines from Chumbawamba probably best describe the China of past centuries: I get knocked down, but I get up again // You are never gonna keep me down. The country has already been knocked off the top economic spot by Rome, by the Mongols and most recently by the USA, but each time the Chinese have managed to work their way back up to become the leading power. But can it succeed again? And what does this mean for shares from Europe, the USA and China in the medium term?
First a look at the USA. The country was hardly affected by the energy crisis and is economically stable. The above-average interest rate level is a burden, but also a sign of a certain strength. In the long term, the technology sector and the current incentives for industrial investment will help the economy. This could also give the stock market a boost. After all, earnings expectations there are currently at 6.5 percent per year over the next decade.
Things look even better in Europe. The continent will benefit considerably if the current burdens in the energy sector can be resolved, which is quite likely in the medium term. The other conditions for a positive development are good, which leads to an equity return expectation of almost nine percent per year if you look at the coming years.
Can China keep up? Due to the collapse of the residential real estate market in the People's Republic and significant interventions in the business models of Chinese internet giants, the Chinese stock market has lost around 40% since last fall. Added to this is the government's massively restrictive coronavirus policy, which is still weighing heavily on the economy and leading to unrest among the population. All of this means that shares are now valued much lower than forecast models predicted. The potential is there. Unfortunately, the political risks caused by Xi Jiping are greater than this potential. Expected earnings? Unpredictable.
You can read the full capital market outlook here.
Reinhard Panse's Perspectives
30.11.2022
Reinhard Panse
China has proven in the past that a crisis cannot harm the country in the long term. However, the current outlook for Chinese equities is anything but rosy.
These lines from Chumbawamba probably best describe the China of past centuries: I get knocked down, but I get up again // You are never gonna keep me down. The country has already been knocked off the top economic spot by Rome, by the Mongols and most recently by the USA, but each time the Chinese have managed to work their way back up to become the leading power. But can it succeed again? And what does this mean for shares from Europe, the USA and China in the medium term?
First a look at the USA. The country was hardly affected by the energy crisis and is economically stable. The above-average interest rate level is a burden, but also a sign of a certain strength. In the long term, the technology sector and the current incentives for industrial investment will help the economy. This could also give the stock market a boost. After all, earnings expectations there are currently at 6.5 percent per year over the next decade.
Things look even better in Europe. The continent will benefit considerably if the current burdens in the energy sector can be resolved, which is quite likely in the medium term. The other conditions for a positive development are good, which leads to an equity return expectation of almost nine percent per year if you look at the coming years.
Can China keep up? Due to the collapse of the residential real estate market in the People's Republic and significant interventions in the business models of Chinese internet giants, the Chinese stock market has lost around 40% since last fall. Added to this is the government's massively restrictive coronavirus policy, which is still weighing heavily on the economy and leading to unrest among the population. All of this means that shares are now valued much lower than forecast models predicted. The potential is there. Unfortunately, the political risks caused by Xi Jiping are greater than this potential. Expected earnings? Unpredictable.
You can read the full capital market outlook here.
About the author
Reinhard Panse
Reinhard Panse is Chief Investment Officer and co-founder of FINVIA Family Office GmbH. Until February 2020, Reinhard Panse was a member of the Management Board and Chief Investment Officer for HQ Trust GmbH, which is owned by the Harald Quandt family. From 2004 until joining HQ Trust GmbH in 2011, Reinhard Panse was Chief Investment Officer of the UBS Sauerborn business unit created within UBS Deutschland AG. From 2001, Reinhard Panse was a member of the Management Board of Sauerborn Trust AG and its legal predecessors. He was responsible for the investment strategy and played a leading role in the holistic asset management and administration of large private assets. Reinhard Panse began his career by taking over capital market and client support activities at Feri GmbH in 1989, after having founded and managed his own wealth management as managing director.
