Globe editors have posted this research report with permission of Mawer Investment Management Ltd. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
Myopia, or nearsightedness, is a refractive error of the eye that causes distant objects to appear blurry, while close objects remain clear. A similar phenomenon can happen in investing: sometimes we fail to see certain risks and opportunities because they seem far away, either in time or geography. Lately, the investing myopia on my mind has been around China.
This musing began a few weeks ago when our team was discussing the questions that have been top of mind for clients. Unsurprisingly, NAFTA, market corrections, and bitcoin topped the list. China did not. This did surprise me, as there is a great deal happening in China beyond trade disputes with Trump and diplomatic efforts around North Korea. The world's second-largest economy is undergoing huge economic, financial, and technological transformations. And dare I say, these trends are as or more important to Canadian investors than, say, bitcoin.
Why pay attention to China? Well, first, the country is a hotbed of disruptive companies that are quickly becoming technology leaders — arguably, the most technological progress outside of Silicon Valley is now happening in China. Second, there are many attractive investment opportunities in China, far more than our team has found historically. Third, the country is going through a major economic transition which may or may not result in some sort of banking crisis, which, given China's role as the second-largest economy in the world, would almost certainly have an impact on global equity and bond markets. And finally, as Canadians, China's economic health has an outsized influence on our collective well-being through commodity prices.
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