ETFs going banana in China + 6 crypto trends to watch in 2021
Ever curious where do Chinese invest their hard-earned Yuan?
Hi, I’m Shuyao Kong 孔姝尧. Da bing is my weekly rumination of worthwhile news happening in China’s crypto and fintech ecosystem.
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Remember: Culture makes people understand each other better.
What Chinese retails are investing in, if not in crypto?
This question is important because the answer sheds light on investment behavior and risk tolerance of the whole economy.
ETFs going banana
If you don’t buy ETF in China, do you even invest?
Though 2021 has just begun, reports showed that a record number of ETFs have already been unleashed to capture retails’ wallets. And guess what, many funds are already oversubscribed…. by 20x, all thanks to ETFs’ astonishing performance in 2020.
Data shows that, while the Chinese stock market rose by a mere 16%, the average ETF return is around the 50%.
An indirect consequence of the ETF’s explosion is the celebrification of fund managers.
The most famous one is Kun Zhang from E Fund, the largest asset management firm in China with over RMB 1.6 trillion (approximately US$ 234 billion) AUM as of June 2020.
Zhang rose to fame by holding Maotai, the famous Chinese national liquor, from 2013 when the stock was RMB 200 ( approximately US$ 35 ) to 2021 when the stock hit its all-time-high at RMB 2600 ( approximately US$ 350), a 10x return in 8 years.
Those who made money from investing in Zhang have become his loyal fans. Check out these fan slogans:
坤坤勇敢飞，iKun永相随 = “Kun Kun fly high, Our love will always be by your side”
坤坤不老，蓝筹到老 = Kun Kun young forever, Bluechips forever ( referring to Maotai)
Suddenly, a slew of fund managers has stepped out of backstage and re-discovered a new world under spotlight. They become increasingly active on social media such as Weibo and streaming apps such as Tiktok, putting a human face for the funds and stock they choose.
If you think people shilling #dogecoin on Tiktok is new, wait until you get on douyin or kuaishou and see the entertaining performance of fund managers.
Put the celebrity halo effect aside, fund managers such as Zhang are simply practicing Value Investing. But the market is so passionate that it treats any gains as the holy grail.
Perhaps a new strategy should be deployed now the market is different?
Real Estate.
Despite the government’s attempt to cool down the overheated real estate market for years, properties are still the most desirable asset. This is especially true for first-tiered cities along the coastal line where the inflow of residents outpaces the outflow, significantly.
But the inflated housing price has very little to do with consumer demand. It’s a result of “an unprecedented flood of cheap money unleashed by the central bank.”
The US isn’t the only country that’s printing money, China has been doing the same since 2008 and the real estate market is the direct consequence of money printer going brrrrr.
What about the other asset classes?
According to a report from the Chinese Central Bank, close to 50% of Chinese invest in some sort of financial products. Insurance products have enjoyed the biggest jump while wealth management products (mutual funds) continue to dominate mindshare.
Perhaps the most important behavioral change of the investment market is the fact that the younger generation of Chinese tends to spend more and save less, compared to their parents. And that would have big ramifications on the investment landscape down the road.
Six crypto trends to look for in China’s Year of the Ox
The signs of the Chinese zodiac must be created by the God of Wealth, for among the 12 animals chosen, the bear is nowhere to be seen. The ox, however, which is a somewhat, um, modified bull, is the second sign of the Chinese zodiac.
Significantly, Chinese New Year, which began Friday, is the Year of the Ox, and it has already been off to a bullish start. Even the amount of red packets your correspondent has received on Crypto WeChat saw a decent increase in size. People are spending fiat to pray for good fortune in the crypto world.
However, a bullish start doesn’t necessarily mean a bullish year. The last Year of Ox was in 2009 and the trauma from that financial crisis has yet to recede from memory.
Therefore, instead of being purely bullish, this week’s da bing looks at six trends that could continue and widen in the new year. By the way, the number six is an auspicious number that denotes smooth sailing. Whether that ends up being the case, of course, is oxishly difficult to predict.
1. China’s big mining rig manufacturers could finally IPO
2. Institutional interest will continue to surge
3. China will wake up to the DeFi Multiverse
4. Centralized exchanges will continue to dominate
5. Even more DCEP will be airdropped, all over.
6. Regulations will continue to tighten
Read the full analysis on Decrypt
Do you know?
“白嫖” means “enjoying without paying the price,” or “freeloading” in Chinese. It has been adopted by the crypto community as a way to describe degens farming crazy APY by doing nothing. The phenomenon became particularly widespread as the exchanges launched their own blockchains and copied DeFi projects to attract liquidity.