Talking Point  

Advisers keep China exposure below 10%

Most advisers have said they keep exposure to China to under 10 per cent in client portfolios.

The latest FTAdviser Talking Point poll revealed 69 per cent of advisers had less than 10 per cent of their clients’ portfolios positioned towards China, while 19 per cent had no exposure at all to the emerging market country.

Darren Cooke, a chartered financial planner at Red Circle Financial Planning, said: "I'd certainly side with the majority on China exposure. 

"In my client portfolios, it sits at none to 6 per cent, depending on the risk level of the portfolio."

Jason Hollands, managing director of business development and communications at Tilney, agreed with the outcome of the poll.

"That most advisers say their clients have less than 10 per cent exposure to China is not a surprise," he said. 

"China may be the most populated country in the world – though it will be eclipsed by India mid-way through this century – and in GDP terms it has a sizeable economy, but big population numbers or GDP figures should not be confused with the actual investible opportunities in China."

But he was surprised at the 12 per cent of advisers who confirmed their clients’ exposure to China is higher than 10 per cent, and warned "this seems extremely high".

Mr Hollands explained: "Do bear in mind that China represents just 3.6 per cent of the MSCI AC World index, a broad barometer of global equity markets."

Economists and investors have long predicted a ‘hard landing’ in China as its economic growth continued to slow.

"There is no doubt that many investors have become more wary towards China in recent years given the worrying expansion of credit, the managed deceleration in its growth rate and entrenchment of authoritarianism," Mr Hollands said. 

"China also has some huge, looming structural challenges, such as an ageing population that is set to shrink and which is already experiencing a contraction in its workforce."

But Mr Cooke said he believed China was still a "high growth area", although he admitted it remained a highly volatile market and so should be part of a well-diversified portfolio.

"Those with higher allocations could be said to be over exposing clients to one market, particularly when that market is a higher risk area," he noted. 

"In my portfolios, I only hold more than 10 per cent exposure in the large, well-developed and more stable areas, principally the UK, US and Japan, as a single country exposure."