Asia Pacific regions, like Hong Kong for example, depend greatly on the success of China. So much so that economic indicators determine the short term success of these markets. For long term success however, investors should consider stock loans as a funding solution, as opposed to trading in and out of positions in sensitive markets.
China, the world’s second largest grossing economy, reported slightly disappointing GDP figures early this week. China sensitive markets like the Hang Seng Index and HSEI traded in a wide range after the data was released. When the market settled down into trend, investors found themselves back in a bear market.
In a market with wild daily swings, savvy long term investors choose not to trade. When a firm or fund needs liquidity to cover short term liabilities or costs, stock loans are a solution with edge. This type of financing combines the flexibility of a loan with the upside of a call option. The best of both worlds. Investors remain in their fundamental thesis, keep long exposure, and leverage low interest rates…all while having limited risk.
On the GDP front, China released data that indicated the country grew at a 6.9% pace in 2015. To put this in real terms, the economy that is nearly 60% the size of the USA ($18T USD) grew over $700B USD in 2015. Spun a different way, in 2015 the world added another whole economy the size of Switzerland or Saudi Arabia. While large in relative terms, the data is far below its previously reported stats. For reference, at the top of the global real estate bubble, China was posting GDP figures over 14%… data has slid more than a 50% from the top.
Year-over-year China grew 6.8%, representing the weakest quarter since the credit crisis and great recession. To this point, Chinese Premier Li Keqiang has pledged stimulus to aid the ailing economy. According to the BBC, analysts have specifically called for stimulus when growth numbers fall below 6.8%. Stimulus will certainly help China and its surrounding regions as Asia-Pac finds its footing during this slight pull-back. The stock market will also likely benefit from fiscal stimulus. Moreover, multiple other regions have started to position themselves as supportive. Japan and the ECB have both recently released headlines regarding fiscal aid.
With operations around the globe, Squadron Lending focuses on stock loans for its clients. The firm operates with an edge due to its wide breadth of experience across geographies, always in touch with the market and the very latest data. Clients have access Squadron’s capital and vast management experience. To learn how we can help you or your client, please visit squadronlending.com. All correspondence is confidential.