China’s shrinking economy has set off alarm bells for investors. Meant to drive a third of global economic growth, this Asian giant is losing international investment. Over $10 billion has already been withdrawn from China’s stock markets by investors in hopes of escaping the financial consequences.
Chinese trade is critical for many countries globally, and over 40 countries from Australasia, the Middle East, Northern Asia, Africa and South America rely on Chinese exports. This means economies reliant on Chinese exports, like construction materials, electronics and technology, for example, could suffer. Poorer economies in Africa and Asia are the first to feel the impact.
With companies moving away from China as a primary manufacturer, there is a chance that production costs could rise and, ultimately, the price of goods. Apple has moved its production centres to Vietnam and India, and increased production costs could increase the price of popular Apple products.
But it is not all bad news. There is potential for good returns for investors if they choose the right investment opportunities.
Diversification
Diversification is one of the best ways to protect your investments from risk. By investing across different asset classes, regions and sectors, you spread the risk of losses, e.g. stocks in financial and energy sectors in Asia and Europe. If one sector, asset class or region performs poorly, the others balance out the loss or even perform favourably.
Fixed Yield Products
Structured or fixed-income products operate by offering depositors a fixed return, which is dependent on specific market conditions. These conditions generally depend on major markets maintaining 80% or 90% of their value. They can help secure long-term financial objectives through decent returns. Investing in fixed-yield products is not for everyone, and speaking with a financial advisor to understand how they work is essential before investing.
Long term investing
Long-term investing in good, diversified funds is still the best solution for building wealth, as long-term investments have the benefit of time to smooth out the volatility in the market and provide stability for your money.
Volatility in specific markets offers potential opportunities for investors. As always, it is preferable to consult with a financial advisor before making investment decisions, as each individual’s financial circumstances and interests differ.
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.
