Episode 21:Should your China-equity allocation be separate from your emerging-market portfolio?
Director, Senior Product Specialist
Listen to Senior Product Specialist Christian McCormick discuss how the latest developments in the economic, geopolitical, and pandemic fronts are impacting the outlook for Chinese equities in 2021. Also: Christian details a framework for investors to consider when deploying capital into Chinese equities, and provides alternatives on how to deploy that allocation in overall portfolios.
The Investment Intelligence Podcast: Should your China-equity allocation be separate from your emerging-market portfolio?
Notes, quotes and references:
J.P. and Christian discuss the opportunity in Chinese equities, Beijing’s investment in its economic future, shifting US-China trade relations and whether China-equity allocations should be separate from an investor’s emerging-market portfolio.
Some key thoughts and topics from this episode:
What might the Year of the Ox mean for global investors in China?
“What the Ox is meant to represent is hard work and persistence, but also a humility and kind of an earnestness. That’s an interesting context for looking at Chinese investments, because … I would say a lot of the hard work around investing in China is still to be done and will occur this year because so many different themes … are really coming to a head this year.”
Should investors be troubled by China’s postponement of Ant Financial’s initial public offering?
China was trying to control “what are traditionally thought of as monopolistic practices. It’s actually a positive that this happens before an IPO occurs … So, from that perspective, we do think there’s a silver lining: We still expect Ant to complete an IPO in the next couple months. We don't know how big it will be, but we think there’s still some positives to come out of all this.”
How is China’s economy changing?
“China is making a concerted effort to have consumer spending on both goods and services be a much larger part of their economy … It’s still relatively small, maybe about 40%, especially relative to what it is in the US—70% to 75%—and other developed economies … Now, they’re putting the mechanisms and government-related structures and regulations in place to help foster that to a greater degree.”
How might US-China relations change under a Biden administration?
“Biden agrees that China is a strategic competitor ... That said, interestingly, when you look at the way that Biden has put together his cabinet … he very much has individuals that have opposite views on China. That is going to create volatility in our geopolitical relationship, in our investment relationship, in our economic relationship, and this will extend beyond the Biden administration.”
Why should international investors take an All-China approach to Chinese equities?
“You want the freedom to be able to navigate among all the different (Chinese stock) listing venues, because each one of them will have their own characteristics and their own alpha opportunities that are different from each other. So why constrain yourself? If you do believe in China, then you want to take advantage with the largest possible opportunity set: That’s what we mean by an All-China approach.”
The full episode has even more details on the topics above. Check it out.
J.P. just bought and hooked up his first turntable in decades, joining the growing number of people who are returning from the digital to the analog world, allowing him to enjoy the tactile nature and warm sound of records, from classics like Bob Dylan to modern greats like Chris Stapleton.
Christian has been reading The Grand Biocentric Design: How Life Creates Reality, which contends that the world operates as it does because of our impact. “The current scientific consensus is that life is a product of the universe—but these authors argue that it’s actually the other way around,” Kirkus writes of the final book of a trilogy. He is also enjoying Chinese cyberpunk novelist Liu Cixin’s The Three-Body Problem, which posits the classic sci-fi question: What happens if man comes into contact with aliens?
Creativity and editing: Timothy Wong.
Production: Mark Egan.