Talking Point  

Advisers invest in Chinese equities despite fears

Advisers invest in Chinese equities despite fears

Almost half of advisers said their clients were invested in Chinese equities to "diversify" their portfolios, despite fears of a Chinese economic slowdown and growing trade tensions, according to the latest FTAdviser Talking Point poll. 

The poll asked financial advisers whether their clients’ portfolios were allocated to Chinese equities and, either way, for what reason.

Some 46 per cent of advisers said their clients were invested in Chinese equities, citing "diversification". 

But 23 per cent said their clients did not have an allocation to Chinese equities due to slowing growth. 

Only 14 per cent said their clients did not invest in Chinese equities because of concerns around escalating trade tensions between the US and China. 

Meanwhile 17 per cent said clients had an allocation to Chinese equities in their portfolios due to its growth prospects.

Sacha Chorley, multi-asset portfolio manager at Quilter Investors, said: "China is an important part of emerging market indices so it should not be surprising that many portfolios hold some Chinese equity exposure." 

Chinese equities have come under increased scrutiny by investors, amid weakening economic data and trade tensions.

China’s manufacturing sector contracted in December, with the Caixin manufacturing PMI slipping to 49.7 in the month, its lowest level since May 2017. 

US tech giant Apple also issued a rare profit warning earlier this month, citing a slowdown in Chinese demand as the key reason.

Alex Shaw, director of Progeny Wealth was surprised about the poll results. 

He said: "I am surprised that advisers would actively choose to invest in a market which is so opaque. While it offers low correlation to other global stock markets, transparency remains key to managing risk and reducing volatility for clients."

He added: "As with other global markets, we believe that volatility is likely to be on the cards. In the absence of full transparency, we are happy to observe from a safe distance."

Stephen Dover, head of equities at Franklin Templeton, said the US-China trade war was less about economics and more about China’s "growing political influence". 

Both the US and China reached a truce last year and held two days of trade talks earlier this month.

He said: "Though the residential real estate market is a concern and economic growth has been decelerating, we do not see a 'hard landing' ahead. We believe there could be long-term opportunities in China’s more domestically-oriented sectors over the longer term."

Jean-Pierre Couture, chief economist at Hexavest, added: "The first half of the year could be a good entry point for contrarian investors because investors’ sentiment towards China is [already] depressed."