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Why we need to switch our investment focus to China

Why we need to switch our investment focus to China

Recently, some of the best investments in our global funds have been in Chinese companies like Tencent and Alibaba.  And that’s hardly surprising. After all, in the words of the ex-Singapore leader, Lee Kuan Yew, China is now “the biggest player in the history of the world”. 


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Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. I really wonder how long the rest of the world will tolerate China stealing market share in almost every industry and obviously in a very unfair manner through cheap labour ,and a low regulation environment, and also state sponsored zombie companies on life support because of overcapacity which is resulting in major damage to most other economies in the developed world . The election of Donald Trump can be almost directly attributed to this phenomenon (and the Russians of course if your a leftist nutter) ,and “flyover America ” is ground zero in evidence of this argument. China has prospered at the expense of other Nation’s and only because they have been allowed to . I think an all out trade war is brewing and China’s cosy relationship with North Korea may be the catalyst and convenient excuse for the USA to even up the trade deficit a little or a lot as the Donald has rightly complained about many times recently , we were told in the 80s and 90s that Asia would eat us alive and they have done that, but I can’t see the developed world taking it lying down for much longer.

  2. China’s strategic situation is not as secure as that of the U.S..

    China shares borders with three major nuclear powers: Russia, Pakistan and India. It shares another border with an unstable paranoid (and also nuclear-armed) North Korea. It has ongoing border disputes with India that remain live and its relations with Russia have historically been icy.

    In addition, China’s actions in the South China Sea are putting almost every South East Asian nation on edge and are deeply resented.

    The U.S., by contract, lies in the western hemisphere and has no peer competitor. It is separated from the next major power by two enormous bodies of water: the Pacific and the Atlantic . It remains the foremost military power among all great nations.

    Sure, China is destined in the next decade or so to become the largest economy in the world. But in matters that pit a nation’s security interests over its economic interests, history shows that nations will defend their security interests every time – no matter what the economic cost.

    In time, and in the degree to which China grows more and more assertive, I suspect that Russia, India, the U.S. and a number of South East Asian nations will gradually come together to form a loose coalition to balance China’s interests. That coalition will be ad hoc informal so long as an accommodation with China remains viable.

    But if history shows anything, it shows that it is not given to powerful neighbours who share land borders to rest easy and become bosom companions. That is not about to change with China’s border with India and Russia.

  3. This may not be directly related to the above article,…. but given the flux or inflexion point we appear to be at, both geo politically and perhaps cycle wise, it would be fair to say foreign exchange volatility / risk is high and somewhat unpredictable. How do your global funds play this risk??..Especially given that currency fluctuation is likely to contribute or detract as much as underlying market performance and . Currently the AUD is on a tear ,defying most experts’ calls and impacting significantly on the funds’ perfotmance. To cut to the chase, are the Mont Global Funds in danger of speculation with respect to currencies, by being unhedged? Isn’t there an argument that Mont Funds would be better off hedging and eliminating the vagaries of currency fluctuation. I know, myself would consider investing more if currency vagaries weren’t so dramatic. The other question, relates to sovereign risk…whats to stop the Chinese Govt to arbitrarilly closing shop??..surely , even if unlikely, it has to be considered when investing in companies such as Alibaba and Tencent.

    • Hi Mike, I think that the higher the Aussie dollar goes, the less argument there is for hedging.

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