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06 Aug 2021

Should you invest in US or China stocks?

Should you invest in US or China stocks? | VI
(c) Sadie Xiao

Investors in Singapore have access to the world’s more developed markets, including China and the US. While this presents huge investing opportunities, it also provides a dilemma on whether they should invest in US stocks or China stocks.

But this leaves us puzzled. After all, why should we limit ourselves to one of these markets? Why not invest in both?

US and China are like opposite sides of the magnet. Ironically, they repel instead of attract each other. On another note, their differences serve as their edge over another.

Why invest in US stocks

Currently, the US holds the most coveted crown flashing “world’s major superpower” – not just economically but also militarily. It’s where the largest companies are located, top stocks are listed, and the world’s most number of billionaires opt to live in. The world pays attention to every movement within the States.

We witness US dominance in the linguistic scene, which says a lot about how the world looks up to the American influence. Even cyberspace uses English as default in programming languages – and yes, even Tencent’s WeChat, a Chinese company. Ten or even a hundred years from now, English will continue to be the primary working language across the planet, in a sense fixing the American foothold in the global market.

We can also attribute the country’s powerful position to its ability to attract top talents from around the world. With the American lifestyle and the status it affords, there’s no doubt the best talents are easily persuaded to live in the US and chase the American dream, hence, adding to the country’s competitive edge. After all, we know a country benefits when it successfully strikes a balance between its local and international talent pools.

We also can’t deny the country’s ability to overcome every hurdle thrown in its direction. Over the past two-and-a-half centuries, the country has successfully managed difficult situations, and without a doubt, it can still get itself out of future worse situations, including a pandemic or a stock crisis, equally well.

See also: What Investors See in a Bear Market (2021)

Why invest in China stocks

For the past few decades, China has been showcasing its wings ready for flight. Now, we see China closely flying under the US tail, prepared to do an overtake anytime. And this is exactly why many investors are looking at Chinese stocks to make a profit. For one, the Shanghai Composite Index grew to 177% in 15 years, just a little difference from S&P500’s 231% growth.

While US companies remain the top innovators in the tech scene, China is following closely. Now, we see companies from the Asian giant spearheading developments in digital currency, mobile payments, telecommunications, and even renewable energy. This highlights China’s potential to dominate the global economy sooner rather than later.

China has also been actively investing in infrastructure, a tell-tale sign of the future growth it’s bound to achieve. If you haven’t heard yet, China’s One Belt, One Road project is already underway. When the project is completed, the country’s position in Asia will grow significantly and it will definitely boost China’s economy.

See also: Where to now for China?

Why not invest in both

The recent news of Beijing’s tightened regulations on its tech companies understandably frustrates most investors interested in China stocks. But we urge you to look at it from a general point of view and a longer-term perspective. Do you think it will override China’s commendable economic growth over the past few decades?

Instead of putting eggs in one end of the scale, why not strive for balanced weight and consider investing in both the US and China markets? Writing off one will mean lost opportunities. To phrase it another way, remember that diversification reduces your investment risks.

Navigating the stock market will always be a daunting task, but with sufficient knowledge, relevant tools, and the right method, you’ll get more confident.

Seeking support in investing? Join us for a free two-hour masterclass in Singapore. You can also join our free masterclasses in Australia, Malaysia, and Taiwan.


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