Global funds seen buying more Chinese assets as reforms widen access to markets, Invesco survey shows
- Four in every five global investors plan to increase their allocations in China in the coming year amid wider market access, Invesco says
- Some 52 per cent of them will put more money into onshore equities, making it the most favoured asset class
China can expect to draw more portfolio inflows in the coming months even as global investors are split in their assessment of the likely impact of geopolitical tensions on the world’s second-largest economy, according to Invesco.
Four in every five global asset owners and professional investors intend to raise their allocations over the next year to seize fresh opportunities created by China’s reform measures to further open its financial markets to foreigners, the Atlanta, Georgia-based money manager said.
The outcome is part of a survey of 411 global managers with US$500 million to more than US$10 billion in assets under management by the Economist Intelligence Unit in August and September. Invesco, which commissioned the survey, published the results on Monday.
More than 80 per cent said they will either significantly or moderately boost their investments over the next 12 months, while only 4 per cent indicated their will trim their positions. Some 52 per cent of them said their will put more money into Chinese equities, making it the most favoured asset class in the survey.
The view underscores the successes investors have chalked up in bets on Chinese assets in recent years as Chinese companies increasingly dominate the global marketplace, especially in technology and the “new economy” arena. The CSI 300 Index, which represents the top 300 stocks traded on the Shanghai and Shenzhen bourses, has climbed 30 per cent this year, the most among Asia’s major stock benchmarks, according to Bloomberg data.
“Many have begun to recognise China as a key investment destination and a pillar of global portfolio allocation,” said Andrew Lo, senior managing director and head of Asia-Pacific at Invesco. “Chinese authorities have shown their commitment to support investor interest in the capital markets, and we have already seen constructive steps such as the lifting of investment quotas earlier this year.”
China said in September it would remove the caps on two cross-border investment programmes, Qualified Foreign Financial Institutional Investor (QFII) and Renminbi Qualified Foreign Financial Institutional Investor, giving foreign fund managers more access to its stock and bond markets.
MSCI begins process to add Chinese stocks in benchmark stock gauges
This year, regulators have given licences to BNP Paribas and Deutsche Bank to underwrite yuan-denominated debt for local and foreign companies, making them the first among foreign lenders to do so. S&P Global Ratings also started rating domestic Chinese bonds, and index compiler MSCI is raising the weighting of Chinese stocks in some of its global indexes in phases.
The downside to that is that China’s economic growth is tapering, hurt by more than a year of trade war with the US. The tensions have upended supply chains, weakened business sentiment and cooled manufacturing. Last month, the International Monetary Fund (IMF) trimmed its forecast for global economic growth to 3 per cent for 2019, the lowest since the global financial crisis.
Apple AirPods craze spreads to China, music wireless-headset stock investors
The investors surveyed were almost evenly split on how the ongoing geopolitical tensions will impact their investment allocations, with 43 per cent negative and 42 per cent positive, Invesco said.
Their view on the economic outlook, however, is refreshing as almost three-quarters expected China’s economic conditions will improve in the next 12 months. Two-thirds agreed the global economy will get better over the period.
China’s vision for own Nasdaq-style technology board draws praises and disdain
Technological development and innovation, such as artificial intelligence and robotics, was the top investment theme, followed by financial services and new economy sectors such as health care and education. Renewable energy is also likely to attract investment, the Invesco survey showed.
“The findings are promising and support our view that China’s massive growth and continuing efforts to allow greater access to its markets represent a significant and increasingly attractive opportunity for both domestic and global investors,” said Marty Flanagan, Invesco’s president and chief executive.
