Made in China “Mermaid” beat Kung Fu Panda 3

Made in China “Mermaid” beat Kung Fu Panda 3

China movie industry is catching up with Hollywood and Bollywood.  Good old love story between a Mermaid and a billionaire in today’s China.  Mix together a message of environmental protection, Jim Carrey style acting and Mr Bean sense of humor  The results were USD 552.5 million box office pretty much all in Chinese speaking markets.  The Mermaid, directed and produced by Stephen Chow who was born in 1962, same year as Jim Carrey.  Stephen Chow also directed and produced Kung Fu Hustle (2004) and Shaolin Soccer (2001).  It was released during Chinese New Year in 2016.  Its box office beat Kung Fu Panda 3 and the Revenant.  This column is not about movie but the success of “The Mermaid” reflects the strength of China domestic economy and its transformation to a service industry driven economy.  China cannot compete against the Frontier Markets such as Vietnam on cheap labor.  Just like Great Britain had to evolve from heavy industries such as coal mining and steel plants.  So when the media says China economy is slowing down.  It is a very general statement.  The labor and resources intensive, environmentally damaging industries like the coal mine owners in Guangxi are suffering.  The Alibaba headquarter in Hangzhou are full of young IT talents chasing their dreams.  China 6.7% GDP growth in Q1 2016 is the results of a cliff hanging resources sector and rocket growth in services sector such as e-commerce, entertainment and tourism.  China stock market has lagged behind Russia and Brazil this year.  There is still time to get on the train.  China A shares indices such as CSI300 includes 300 listed companies and is a good representation of the overall China A shares stock market.  Hang Seng China Enterprises Index “HSCEI” represents 40 large Chinese companies listed in Hong Kong Exchange is also a good representation and Hong Kong is a more accessible market.

The “B” and the “R” in BRIC have been on fire in a good way, stock market and currency wise.  Brazil Ibovespa index year to date return is +23.72% as of 21 April, 2016 and Brazilian Real strengthened against USD by 10.89%.  Russian MICEX +10.71% and Russian Ruble strengthened against USD by 8.8% this year.  Well, the numbers look good and showed nice recovery after last year correction.  The Brazil story is very different to Russia.  Investors are putting money on a potential change of leadership in Brazil but change does not necessarily equals to economic growth.  Typically, the country that host Olympics empties their war chest to put on the games.  There is some ground to consider buy on dream and sell on fact in the Brazil investment story.

Russia economy has been bleeding mainly due to oil price collapse and it was looking very concerning in 2015 as the Russian government tried to defend the Rubles.  In the end, Russian government accepted the currency market was like an ocean and no one could fight against the force of natural.  Beside a falling Rubles and stock market, the government had to deal with the conversations with US and Euro over Ukraine and sending troops to Syria.  Against expectations, some Russian companies survived the storm and emerged stronger.  Typically, these are export driven business with cost in Rubles and revenue in USD or Euro.  For example, steelmaker like Severstal saw its profit margins rising to record level in six years.  Its share price rallied from RUB 600 level at the end of last year to RUB 800 in April.  Even the Russian banks are enjoying the sunshine.  Sberbank has gone up more than 20% since its dip in January.

The “I” and “C” in BRIC are behind.  India Nifty index cover 50 blue chips and its year to date return is down 0.43% and Indian Rupree has depreciated against USD by 0.36%.  India attracted USD 63 billion worth of Foreign Direct Investment (“FDI”) projects in 2015, overtaking China.  This is the first time India top the FDI chart.  So the money has gone in through direct investment although not through buying listed company shares.  China CSI300 index that covers 300 stocks listed in Shanghai and Shenzhen stock exchanges is down 15.29% year to date and Chinese Yuan has strengthened against USD by 0.18%.  This makes China the worst performing market among the BRIC year to date.

Also want to say “Happy Birthday” to the Queen and perhaps next year Donald Trump would represent US to congratulate her.  Will Britain still be part of EU next year?