One of Warren Buffett’s more famous quotes is to “be fearful when others are greedy, and be greedy when others are fearful.” In this note, we explore what is making some investors fearful of China, identifying three key risks: i) regulation; ii) geopolitical tension; and iii) COVID-19. All three were explored in detail in our initiation. Understanding why regulations are being introduced means investors can identify companies that will be affected and when restrictions will end. Geopolitical tension, while harder to assess, is at above normal levels, but this is not new. China has managed COVID-19 well. Pricing anomalies create research-led new opportunities.
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