Performance Update – July 2023

15 July 2023

US inflation seems to be moving in the right direction and has given markets some confidence. China has lagged so far in 2023, but there are plenty of reasons to be bullish!


Dear *|FNAME|*


There are signs China’s economy may be turning a corner after COVID disruptions. GDP grew a steady 3.0% in the second quarter, up from 2.5% growth in Q1. This suggests economic activity is starting to stabilize as pandemic impacts fade. Retail sales also picked up in June, rising 0.5% year-over-year after a sharp drop in May, pointing to recovering consumer demand.

Exports rebounded strongly in June, up 7.3% amid improving global growth and resolution of supply chain bottlenecks. The job market remains challenging, but unemployment has come off its highs earlier this year. Inflationary pressures also look to be easing based on June’s consumer price data.

While risks remain, including from recurring COVID outbreaks and global recession worries, the government has reiterated its 5.5% full-year GDP growth target. Key to achieving providing measured stimulus and policy support and because of accomodative Government we remain bullish on Chinese equities.

For investors, the steadying growth trajectory and potential for further opening of the economy present opportunities. Sectors like retail, travel, and manufacturing could see upside as consumption recovers. Continued infrastructure spending will also benefit materials and commodities.

In summary, China appears to be through the worst COVID-driven economic impacts. While risks remain, stabilization of growth and targeted stimulus measures could boost investment prospects in the second half of 2023. China’s economy seems primed for a gradual recovery.

US Inflation

The June CPI report released yesterday came in below expectations, the first such positive surprise in over 18 months. Headline CPI rose 0.2% month-over-month, below forecasts of 0.3%, while core CPI also increased 0.2% versus an expected 0.3% gain. On an annual basis, headline CPI slowed to 3.0% from 4.0% in May, and core CPI decelerated to 4.8% from 5.3%, marking the lowest readings since October 2021.

This data is net of fund charges but does not include potential platform costs or advisor charges which are likely to alter the overall returns set out above.

While our portfolio performance has been disappointing lately, we believe our holdings are well-positioned to benefit from an eventual rebound in undervalued areas like China. This should enable us to recover some of the underperformance experienced over the past 12 months.

Though Chinese equities have faced significant headwinds from COVID lockdowns and regulatory actions, valuations now appear attractive relative to fundamentals. Our portfolios are tilted toward shares that should rally strongly when conditions improve.

Periodic challenges are part of long-term investing. While unpleasant, drawdowns present opportunities to upgrade holdings trading below intrinsic value. We aim to leverage this environment by sticking to proven, research-driven methods.

In summary, our philosophy and process remains unchanged. By targeting undervalued areas like China, we believe our portfolios hold potential to recover recent losses when broader sentiment improves. Patience and perspective are key.

Have a great few weeks everyone!

Louis Greening
Investment Specialist
Clear Financial Advice

Our mailing address is:
[email protected] to change how you receive these emails?
You can update your preferences or unsubscribe from this list.