3 key reasons: Time to look into China


You could see the price behaviour over the past months, it is showing signs of support. I analysed this with three key reasons:

1) On the fundamental front, China corruption clean-up is top reason for China’s slowdown according to former central banker. I see it as a short-term pain (the last few years) for China, but for a long-term good on this tough choice they have made.

2) Though there is a growing concern on the corporate debt in China, I believe the Chinese government's coffer is still growing, according to Bloomberg report, they have been stockpiling on Gold.

"The People’s Bank of China may have tripled holdings of bullion since it last updated them in April 2009, to 3,510 metric tons, says Bloomberg Intelligence, based on trade data, domestic output and China Gold Association figures. A stockpile that big would be second only to the 8,133.5 tons in the U.S."

A parallel comparison is with this story: Between a rich father and his spendthrift children. If ever the children are broke, the father is there to help. However, this father did a decent job from avoiding them to go broke, he disciplined them with " corruption clean-up" and reduce their allowance with a series of "deleveraging with new regulations".

3) As for the risks, I considered it as limited. From the China A50 chart, what are the chances for it to fall another 40%? And for the others, what are the chances for it to correct 40% downwards? Who has the greater risks?

A mature investor will always take priority to consider on the potential downside risks, not on the immediate gains.

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