Parbrook ‘feeling more optimistic’ about China

Schroders’ Robin Parbrook has barely added to Chinese stocks in spite of becoming more optimistic about the country’s prospects.

Mr Parbrook, who co-manages the Asian Total Return investment trust, said the current sell-off of Chinese stocks was being driven by a realisation among investors that the world’s second largest economy would slow down and that real interest rates would rise.

“Our views on the structural issues that China needs to resolve have not materially changed, other than that the credit bubble has got even bigger and more opaque,” he said.

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“However, what is fascinating about China at the moment is that we could finally be on the cusp of genuine change.”

The manager said president Xi Jinping appeared “genuine about reform” at the country’s third plenum meeting in which he “actually outlined some detail regarding implementation” of changes.

“Most of the policies would correctly move the economy towards consumption and away from investment,” he said.

“For the first time in four years we are feeling more optimistic on the longer-term outlook in China, both for the economy and equity markets.”

But Mr Parbrook said this optimism had not prompted him to increase his exposure to Chinese stocks.

“So are we buying Chinese equities? No, not really,” he said.

“Our weightings in China have nudged up – mostly healthcare and industrials/exporters with strong niches.”