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Asia Tea Time - #85 ☕

Asia Tea Time - #85 ☕

China's CEWC and How to Get Exposure to Bitcoin Through ETFs

Tim Phillips
December 15, 2024 • Estimated Reading Time: 7 minutes

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This week I talk China’s snooze-fest of a CEWC and the best way for investors to get long-term exposure to crypto.

Macro in Asia

China’s Central Economic Work Conference disappoints, stocks fall

In China, the Central Economic Work Conference (CEWC) disappointed investors who were hoping for more details surrounding policy support.

Chinese stocks duly fell on Friday and the CSI 300 Index of onshore Chinese stocks declined by 2.4% to cap its worst day in three weeks.

Why it’s happening

A bunch of boomer-age men – who make up the all-powerful Politburo in China – typically meet before the CEWC takes place and announce some policies.
That meeting took place on Monday and set the stage for the CEWC, which is a 2-3 day event where China’s top leadership spill the tea on their own thoughts about the economy and potential policies in the coming year…all behind closed doors, of course.
This year’s CEWC was more closely watched than usual as it came only a few months after some big announcements from the People’s Bank of China (PBoC), including interest rate cuts and stock market support.

Why it matters

China’s economy isn’t exactly “firing on all cylinders” right now and investors were hoping some concrete policies would come out of the CEWC.
The CEWC doesn’t typically have detailed policy releases and it normally sets the stage for the National People’s Congress (NPC) in March, where there are big-time announcements regarding the economy and policy for the year ahead.
China’s overall stock market is still one of the world’s largest, if you include China’s onshore markets + the Hong Kong Stock Exchange, and investors will be hoping that this year’s rally can continue.

What’s next?

Watch out for when President-elect Trump takes office in the US as his trade and tariffs policy with China will likely impact what the Chinese government does to help support growth.

Tim’s Take

Investors in China stocks have not been feeling the love from policymakers in recent years. That’s been down to the crackdown on China’s tech sector and slowdown in growth for the world’s second-largest economy.

Were they reasonable to be expecting some big policy announcements from the CEWC? Not really, given the history. But the market has been desperate to latch on to any potential positive from the Chinese government when it comes to policy. The CSI 300 fell Friday morning on disappointment when it became clear that no concrete announcement wascoming.

That’s because the government has been relatively comatose when it comes to implementing any sort of meaningful fiscal policy. Consumer inflation continues to be anaemic and for producers, there’s outright deflation – there have been falling prices at factory gates for 26 consecutive months now.

That doesn’t bode well for the broader economy but the market will certainly be building up to the NPC in March and – no doubt – getting ahead of themselves.

Overall, it’s more telling that the market now is nearly entirely driven by big government and policy meetings rather than anything to do with actual earnings or what’s happening at the company level. Investing in China has become an exercise in trying to predict what the government will do next.

While that might be fun for some investors, for most people it seems that trying to get into the psyche of the Communist Party of China (CPC) just isn’t worth the effort.

Tim’s Money Tip of the Week

Everyone is losing it over Bitcoin surpassing the key US$100,000 price level. However, as I’ve always said, no matter how you think of cryptocurrencies and how the current rally has been driven by Trump’s election, the big moment for crypto came in January of this year.

That’s when a raft of Bitcoin ETFs were approved by the US Securities and Exchange Commission (SEC) and subsequently listed on US stock exchanges.

So, while it might not exactly be a great time to “go all in” on Bitcoin when the hype is this real, it does make you wonder whether crypto – namely Bitcoin – has now been institutionalised in the US and has a longer-term future in asset allocation circles. That’s because it’s gone mainstream now in terms of investing in it, given the accessibility barrier has been significantly lowered.

If you do think you want long-term exposure to Bitcoin, then buying it through an ETF probably makes the most sense. The biggest Bitcoin ETF out there (by far) is the iShares Bitcoin Trust ETF (NASDAQ: IBIT) and it’s now amassed a whopping US$54 billion in assets under management (AUM).

The ETF has an annual expense ratio of 0.25%, which isn’t terrible for an ETF that gives investors access to an alternative asset.

One big drawback of a Bitcoin ETF to be aware of is that ETFs only trade during market hours. Crypto? Well, their markets are open 24/7 so anything that happens over a weekend in crypto markets won’t be reflected until Monday morning when stock markets open.

Despite this, if investors are looking to get exposure to crypto longer term, just remember two things; 1) size your position responsibly and 2) stay away from shitcoins (like the recent Hawk Tuah Meme Coin debacle) at all costs.

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