Like for many value investors, 2023 hasn’t played out as Platinum Asset Management CEO and Co-CIO Andrew Clifford might have expected. He was sceptical of the run-up in US stock prices in 2021 and his company made plenty of money shorting stocks there last year. Yet, surprisingly, the US market has come roaring back this year.

Clifford still thinks the full impact of the fastest US rate tightening cycle in 50 years has yet to be felt. He says interest rates impact economies with a lag of 18 to 24 months. It’s been 16 months since the first US rate increase. Clifford believes the rate hikes will flow through to the US economy and corporate earnings for the remainder of this year and 2024:

“History suggests that we should be expecting a pretty difficult economic environment [in the US].”

Clifford says the US stock market has typically peaked after the final rate hike in a cycle. It makes intuitive sense as the US Federal Reserve normally stops raising rates when it sees a slowdown in the economy and when earnings start turning down. Clifford admits that this observation isn’t entirely helpful because no one knows at what point the last rate hike is.

While the US market is near highs, China’s remains in the doldrums. Like many investors, Clifford was expecting a bounce back in the economy as China eased Covid lockdowns late last year. He says the cause of the latest downturn is centred on the property sector. Falling property sales have led to a crash in construction activity – which is at its lowest level for the residential space in about 20 years:

“It’s [Construction’s] a big part of the economy and it’s very sick at the moment.”

 China construction starts

A few years ago, the Chinese government tried to control the property market by cracking down on speculators. They succeeded, or perhaps outdid themselves. Developers and the public have since lost confidence in the residential market.

While the media and investment commentators speak of a Chinese property bubble bursting, Clifford doesn’t see it that way:

“Property prices have gone up at rates below nominal GDP growth. They’ve built probably 240 million new apartments in the country since 1999, so that’s the modern housing stock. So they haven’t even created a modern housing stock for urban populations yet by a long way.”

He says the property market can bounce back though people need to have confidence in it. And the government is trying to build that confidence through numerous measures.

Yet Clifford doesn’t expect large-scale stimulus from the government. He explains that China provided enormous stimulus during the 2008 GFC and it was later acknowledged as a big error by the government. Put simply, money was splashed on large-scale projects. Clifford says the government doesn’t want to repeat that mistake or the more recent mistake of the West in stimulating economies during Covid to such a degree that it’s contributed to the large spike in inflation since.

Clifford believes investor pessimism toward China is creating significant stock opportunities. On the one hand, there are stocks with structural tailwinds such as ZTO Express – ‘the UPS of China’ – and CATL – the world’s leading electrical vehicle battery marker. Both are growing prodigiously yet share prices have been marked down with the rest of the Chinese market. On the other hand, deep value comes from property developers in the so-called eye of the storm.

To find out more about the Chinese stocks that Andrew Clifford likes, as well as why he thinks Japan has bright prospects over the next five years, hear his full interview on Morningstar’s Wealth of Experience podcast here.

James Gruber is an assistant editor at Firstlinks and


Wealth of Experience

James Gruber is an assistant editor at Firstlinks and