Maximum uncertainty for China? 26 januari 2018
Are we at the point of maximum uncertainty for China?
The China Policy Uncertainty index is an interesting metric to follow. The index measures economic uncertainty by counting uncertainty in media articles and by counting the degree of disagreement between professional forecasters. You can find more on the composition of the index here: http://www.policyuncertainty.com/
Policy Uncertainty is currently running at 9 times the normal. One should therefore start to wonder if the point of maximum uncertainty has been reached? Look at past peaks in uncertainty. Have they coincided with bottoms or tops in the Chinese equity market? I let it up to the reader to decide for himself.
Country equity allocation involves much more than just looking at Policy Uncertainty. This is just one indicator in the strategist toolbox. An investor should take a holistic view and consider many more topics (leading macro indicators, valuation, technicals,…) before allocating to a country.