China has experienced a slowdown in the last few months. Investments, manufacturing, exports, and consumer spending are in a slump, and unemployment is skyrocketing. International private investors and companies are both challenged with lower returns.
How does this affect international companies and investors?
This slowdown affects producers and manufacturers internationally, especially the countries that rely heavily on Chinese manufacturing or have most of their manufacturing plants in China.
Also, companies with significant investments in China and relying on Chinese consumption are battling, like Starbucks and luxury goods provider LVMH.
This international cascading effect takes its toll on the heavily reliant US economy and other reliant global countries. It pushes up prices of goods and inflation, and consumer spending drops, causing a slowdown in growth. Struggling companies mean lower share prices and lower profits for investors.
Diversification is the solution.
Some have already, but most international companies affected by China are looking to diversify their manufacturing to avoid losses. This includes spreading manufacturing across various Asian countries like Vietnam and India, as iPhone manufacturer Apple has done.
This slowdown in global market recovery has also affected the markets. Investors are riding a roller coaster of ups and downs in market performance. For investors troubled by these global economic effects, diversifying is one of the best ways to mitigate risk and bolster portfolios against losses. This means spreading their investments over various economic regions like the US, Asia, Europe, emerging markets, sectors like energy, financials, and IT, and asset classes like equities, stocks and bonds, and cash to minimise losses.
Some sectors are performing very well despite battling global economic recovery. Recently, Tech companies reported high profits as AI tech is embraced more and more daily. Oil prices are on the rise due to production control, and existing investors in energy could see a healthy profit for the rest of the year. Sector performance comes and goes, and it is essential to have a balance of various industries and sectors.
When making decisions on investing, it is essential to consult with a financial advisor to help diversify your portfolio according to your risk profile so that you can build value and get a favourable return to achieve your financial goals. Add well-diversified funds that include equity, stock, bonds and cash to your investment portfolio that can weather the storm of market volatility and perform favourably over the long term. The allocation of equities, bonds, alternatives and cash will depend on your risk profile and the amount of risk you wish to tolerate.
Please note, the above is for educational purposes only and does not constitute advice. You should always contact your advisor for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.