I have recently invested in China, and it has been losing its value ever since. It was meant to be a long-term investment with a proper risk measured size, so I am not too worried about it. When I purchased the ETF, I hoped that I caught the bottom of the falling knife (which, in all likelihood, won't happen), but it looks like there may be some more room to fall for the Chinese stocks. Recently Chinese government decided to lock down a city three times the size of New York. Shanghai is home to the world's busiest port, followed by Singapore. The lockdown may impact the world's already stressed supply chain and push the inflated prices of everything even more. Here are some facts:
- Shanghai's population is equivalent to Australia's entire population.
- Shanghai's GDP was only 3.8% of China's national GDP in 2021.
- Shanghai is a trade hub that accounted for 7.3% of China's exports and 14.4% of imports in 2021.
- Shanghai is one of the most important semiconductor manufacturing centres. The lockdown will significantly impact the supply shortage of semiconductors by worsening the situation.
At first glance, Shanghai is big enough to make a noticeable impact, but it is nowhere close to being big enough to cause mass panic.
The Zero-Covid lockdown announced in Shanghai is an interesting learning opportunity from an investor's perspective. The total lockdown of a country or a city that's the size of other nations is probably the worst possible thing you can imagine besides the war.
- Where is the breaking point of our globalised economy? Could it possibly come to a collapse at some point?
- How will the investors react to the ever-worsening supply chain problems?
- Will specific industries in China benefit from the lockdown, like what happened to the consumer markets here in the West?
- How far will the stock prices go down and how will it recover?
My heart goes out to the people suffering from all of this. I hope the situation gets better and we can all recover from this dreadful virus.