China risks

Hi Ray,

At MM we don’t expect a military conflict with China in the foreseeable futures especially not one involving ourselves. However, if the risk increase the obvious doesn’t always  unfold. For example Trump looking to exit NATO and the Ukraine has propelled European equities to all-time highs while their peers struggled, the reason, Germany intends to alter borrowing rules and raise €500 for increased defence spending.

If China did enter a  major military situation, or the markets just feared it was likely, many pockets of the market would struggle but iron ore (Fe) and respective stocks may rally. The bulk commodity plays a crucial role in warfare, both historically and in modern times. It is the primary raw material used to produce steel, which is essential for manufacturing weapons, vehicles, infrastructure, and defense systems.

At this stage Chinese equities are outperforming with “Shawn’s Trading Ideas” liking the iShares Large-Cap China ETF (IZZ) which has almost doubled from its 2024 low, i.e.  the pundits expecting a conflict involving the 2nd largest global economy aren’t seeing stocks react as many might think.

However, to specifically answer  your question, don’t have all your eggs in one basket and ensure correct asset allocation across multiple asset classes. Using stocks as an example, if we hold 5% in one stock/view and it halves it will only take 2.5% off the portfolio, damaging but not life changing.

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iShares Large-Cap China ETF (IZZ)

LAST UPDATED 13/03/2025 16:59

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iShares Large-Cap China ETF (IZZ)

LAST UPDATED 13/03/2025 16:59