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Chinese assets offer opportunities after a sell-off as headwinds in economy shall pass, JPMorgan says. Photo: Shutterstock

Exclusive | JPMorgan’s wealth chief Erdoes backs China markets after stock rout as best opportunity to emerge when doubters flee

  • JPMorgan’s asset and wealth management CEO says markets offer better entry point than three months ago
  • ‘Even if you don’t want to invest in China, it affects every other company that you are investing in’, she says in interview
China still presents significant opportunities for global investors despite a market drubbing last week sparked by the Communist Party’s twice-a-decade leadership reshuffle. The headwinds hobbling the world’s second-largest economy “shall pass” over time, JPMorgan says.

When investors face uncertainty, they need to have the patience and expertise to understand how China works, said Mary Callahan Erdoes, chief executive of the US bank’s asset and wealth management unit, which oversees US$3.8 trillion of client assets. While it was natural to de-risk, the best time to invest is when people are in doubt, she added.

“With the macro backdrop and the geopolitical issues around the world, lots of opportunities will present themselves,” Erdoes said in an interview with the Post.

“If their portfolio calls for a global allocation, and they haven’t had exposure to certain areas of the world, like Asia, like China especially, this is a much better entry point to begin to phase in than it was three days or three months ago.”

Erdoes, whose unit manages US$3.8 trillion of client assets, is seen during a Post interview at JPMorgan’s office in Central, Hong Kong in October 2022. Photo: Xiaomei Chen

President Xi Jinping cemented his power with an unprecedented third term after the party Congress, stoking concerns he will persist with an unpopular zero-Covid policy and heighten competition on technology and trade fronts.

In the aftermath, Chinese stocks sold off from Shanghai to Hong Kong and New York, erasing more than US$278 billion of market capitalisation.

Alibaba Group, the owner of this newspaper, was among the biggest casualties. The stock plunged 11 per cent last week, while tech bellwethers like Tencent Holdings and Meituan both lost 14 per cent.

HKEX chairwoman: China economy sure to rebound as reforms continue

The MSCI China Index corrected 8.9 per cent, the most since March, and the worst post-Congress beating on record.

The 6.4 per cent sell-off in Hong Kong to a 13-year low was briefly tempered by dip-buying. State agencies attempted to calm nerves, while official data showed the Chinese economy fared better than market consensus.

Erdoes described the post-Congress market volatility as first-order effects. Investors need to also be aware of second- and third-order effects arising from any changes in government, policy or regulation. “When people are in doubt, it is often the best time for investment opportunities,” Erdoes said.

“The results of the party Congress made some investors ask questions that they may not have had before.

“It is now making investors say, what does this mean? What does ‘consolidated power’ mean? And when change like this occurs, it is a natural reaction for investors to de-risk.”

It is “mandatory” for global investors to understand how China works, she added.

“No matter where you invest in the world, you have to have a fundamental understanding of the world’s second largest economy, and how it works,” she added.

“Because even if you do not want to invest in China, it affects every other company that you are investing in.”

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When investors face uncertainty, she said, they have to “sift through that to say ‘let’s figure out the areas that are still attractive like: are people still going to invent great companies in China? Are they still going to make great things? Are they still going to sell great things? What trends will continue irrespective of policy changes? Are people going to stop buying electric vehicles?’”

Erdoes oversees the JPMorgan division that produced US$1.2 billion of net income in the third quarter, a jump from US$215 million in the preceding three months, and a 2 per cent increase from the same period last year. The unit generated record revenue, pre-tax and earnings in 2021.

Her backing for Chinese assets came amid measures by the US to curb Beijing’s ambitions in acquiring hi-tech semiconductor chips, increase its military capability and prevent US persons from owning any interest in sanctioned Chinese entities.


How ordinary people in China view the country’s ‘dynamic zero-Covid’ policy

How ordinary people in China view the country’s ‘dynamic zero-Covid’ policy

Fidelity International believes now is a good moment for long-term investors to brave the market, according to Andrew McCaffery, global chief investment officer of the company’s asset management business.

Measures more conducive to growth, including changes to its zero-Covid policy, could be rolled out next year, he added.

China’s economy grew by a faster than expected 3.9 per cent last quarter, after almost stalling in the second quarter as Covid-19 curbs and slowing exports hurt factories. Annual growth is likely to be 3.7 per cent in 2022, according to Wind data, below the official target of around 5.5 per cent.

“There will be high winds that can cause a lot of damage,” Erdoes said, “and then eventually, this too shall pass.”