Making money: what the experts think
The taxman cometh
The Budget isn’t until 22 November, but people are “already second-guessing” the Chancellor’s plans, said Anne Ashworth in The Times. And, despite a surprise fall in public borrowing, “a tax grab is expected”. The obvious place to fish, in the view of former pensions minister Steve Webb of Royal London, is pension tax relief: “a bloated, expensive, monstrous area of spending”, as he sees it, and one which has grown by £3bn in the past year alone. Moving to a flat rate of 20% relief would save an “awe-inspiring” £13bn a year. But some doubt whether Treasury officials bogged down in Brexit have enough thinking time to draw up the necessary legislation. The upshot is that Philip Hammond “may be eyeing the tax efficient vehicles favoured by the affluent”: notably Venture Capital Trusts and Enterprise Investment Schemes. Someone committing £1m to an EIS “may think that the £300,000 tax break is a fair enough reward for backing high-risk businesses”. But the Chancellor may beg to differ.
China, risks and rewards
“Two years ago, Chinese stock markets sent tremors around the globe,” said Aime Williams in the FT. How times change. According to Goldman Sachs, Asian equity markets are up 25% since the start of 2017 – their best performance since 2009 – with Chinese equity funds doing particularly well. “Basically, we’ve gone from alarms and blue lights flashing that China is about to crash to thinking it’s pretty much steady as she goes,” said Gary Greenberg of asset manager Hermes. Data from Morningstar suggests that funds investing in China have returned 19% on average over the past six months. But have the blue flashing lights really gone away?
Playing “the Wild East”
The best performing funds for retail investors (GAM’S China Evolution, Fidelity China Focus and Henderson China Opportunities) have returned 77%83% over three years. China remains a “high-risk opportunity”, said Cyrique Bourbon of Morningstar. The risks of “the Wild East” – ranging from corporate governance issues and government interventions, to China’s “troublesome” financial system – are well known. But the potential upside for daring investors is huge. “In an inefficient market, careful stock-pickers could win big.”