ETF Edge: Is China still investable?

ETF Edge: Is China still investable?

>>> WELCOME BACK I’M BOB PISANI THIS IS ETF EDGE IS CHINA STILL INVESTABLE? RISK FROM CHINA REGULATORS SEEKING TO REIN IN EVERYTHING FROM TECH TO EDUCATION TO FOOD DELIVERY SERVICES AND ALSO FROM U.S. REGULATORS LIKE S.E.C. CHAIR GARY GENSLER WHO IS NOW CALLING FOR MORE DISCLOSURE FROM CHINESE FIRMS REGARDING THEIR OWNERSHIP STRUCTURE. AFTER A DECADE WHERE INVESTORS HAVE INCREASED EXPOSURE TO CHINA, MANY ARE DEBATING WHETHER CHINA SHOULD BE CONSIDERED A SEPARATE ASSET CLASS FROM THE U.S. AND FROM THE REST OF THE WORLD. JOINING US, KEVIN CARTER, WHO RUNS EMQQ. THEY INVEST HEAVILY IN THE CHINESE CONSUMER AND THE FOUNDER OF FREEDOM 100 FRDM THAT WEIGHTS EXPOSURE TO EMERGING MARKET EQUITIES BASED ON PERSONAL AND ECONOMIC FREEDOM METRICS. KEVIN, WE TALKED ABOUT THIS FOR MANY YEARS YOU’VE REPEATEDLY TOLD ME, INVEST IN THE CHINESE CONSUMER RIGHT NOW. IS THAT STILL FEASIBLE WITH THIS INCREASED REGULATORY RISK WE’RE HAVING >> I THINK IT IS ULTIMATELY INVESTING IN CHINA AND EMERGING MARKETS, THE REAL STORY, THE THING THAT’S EMERGING ARE THE PEOPLE BILLIONS OF PEOPLE MOVING. THEY WANT STUFF. MORE AND BETTER FOOD, CLOTHING, ET CETERA. AND THAT’S, YOU KNOW, MANY WAYS THE BIGGEST GROWTH STORY IN THE WORLD AND IT’S GOING TO CONTINUE BUT IT’S MIGRATED TO A SMARTPHONE CONSUMPTION MODEL AND THESE REALLY ARE AMONGST THE BEST GROWTH COMPANIES IN THE WORLD. AND CHINA RIGHT NOW IS TRYING TO CATCH UP WITH REGULATIONS AND THIS IS NOT A CHINA ONLY PROBLEM. THIS IS SOMETHING HAPPENING ALL OVER THE WORLD YOU SEE IT IN THE UNITED STATES WHERE APPLE AND FACEBOOK AND GOOGLE ARE UNDER ATTACK BY ALL CORNERS AS WELL. SO I THINK THE MARKET, HOWEVER, HAS TAKEN THE CHINA REGULATORY ISSUES VERY HARD AND AS THEY SAY, YOU PAY A HIGH PRICE FOR CONSENSUS AND THESE ARE SOME OF THE GREATEST GROWTH COMPANIES IN THE WORLD TODAY AND FEAR HAS BEEN VERY, VERY HIGH >> KEVIN IS SAYING STAY FOCUSED ON THE CONSUMER, ON THE EMERGING MARKET CONSUMER AND ON PRIVATE COMPANIES IN CHINA BUT IS THERE A DISTINCTION ANYMORE? ARE STATE-OWNED ENTERPRISES IN CHINA, FOR EXAMPLE, AND PRIVATE ENTERPRISES NOW ESSENTIALLY ALL THE SAME ARE THEY ALL CONTROLLED OR OWNED BY THE CHINESE GOVERNMENT AT THIS POINT >> YEAH, SO BY LAW, EVERY CHINESE COMPANY DOES HAVE TO HAVE A COMMUNIST PARTY STYLE WITHIN THEIR COMPANY EVERY COMPANY’S DATA LIKE THESE TECH COMPANIES, ALL THEIR DATA BELONGS TO THE GOVERNMENT AND THEY’RE NOT ALLOWED TO GO OUT AND RAISE FOREIGN MONEY IF THAT COMPROMISES THE DATA PROTECTIONS AND THE DATA PRIVACY AND BY PRIVACY I MEAN THE GOVERNMENT CAN ACCESS IT BUT NO ONE ELSE CAN SO IT IS REALLY VERY LITTLE — MAYBE NO DISTINCTION BETWEEN STATE-OWNED AND PRIVATE COMPANIES IN CHINA I MEAN, IN OTHER COUNTRIES THAT HAVE MORE PERSONAL AND ECONOMIC FREEDOMS THEN MAYBE YES THERE’S A DISTINCTION. OUR FUND ALSO EXCLUDES STATE-OWNED ENTERPRISES. BUT THAT’S JUST NOT ENOUGH IN A COUNTRY WHERE EVERYTHING IS CONTROLLED BY THE GOVERNMENT >> SO IS CHINA UNINVESTABLE, PERTH? YOU INVEST IN COMPANIES FROM TAIWAN AND AROUND THE REST OF THE WORLD. ARE YOU SAYING COMPLETELY STAY AWAY FROM CHINA ALTOGETHER >> SO OUR FUND HAS ABSOLUTELY NO ALLOCATION TO CHINA. IT’S BEEN THAT WAY SINCE INCEPTION TWO YEARS AGO. AND WE’RE CONTINUING THAT WAY NOW. THAT’S BECAUSE OF THE LACK OF PERSONAL AND ECONOMIC FREEDOMS SO WE DON’T BELIEVE THAT THERE’S A PRICE AT WHICH WE’RE WILLINGEE TO PUTn S TA
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ETF Edge: Is China still investable?

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