'China should be treated as its own asset class'

Virginie Maisonneuve told FTAdviser that overall, investors should have a dedicated asset allocation to China for a number of reasons.

“[Firstly], if you look at the size of the bond market and equity market [in China], they are very large.”

She said a second reason is that China works in long cycles, as it works to five-year plans for social and economic development, which do not tend to run in tandem with other global market cycles.

Another tip for investing in China is to keep an eye on the overriding macro policy framework.

In China, you don’t buy the market overall, you buy the areas where you think there’s going to be a lot of opportunities.Virginie Maisonneuve

China is not as transparent when it comes to things like monetary policy, Maisonneuve said.

“Unlike in the West, where you can see how the Federal Reserve or Bank of England tries to give hints to the markets to let them know [future policy], China is quite different because people are not used to following what think tanks are saying.”

So, she said, investors can be more easily taken by surprise when regulatory crackdowns are announced, such as earlier this year when the Chinese government enacted a wide-ranging clampdown on industries such as tech firms, video games, and real estate speculations.

“[So] you need to have that awareness at that macro and policy framework level, if not you get surprised.”

Maisonneuve joined AllianzGI as global CIO of equities in June this year, moving to London from Singapore where she was running her own independent management consultancy focussing on asset management. 

She was previously CIO at Eastspring Investment, the Asian asset management arm of Prudential, but left in January 2020 after a restructuring.

She began her career in China as a consultant for the French ministry of foreign affairs, and holds a degree in Mandarin from Université Paris Dauphine.

Don't invest in ETFs

Maisonneuve also said investors should not be buying passives or ETFs in China.

“In China, you don’t buy the market overall, you buy the areas where you think there’s going to be a lot of opportunities.

“There’s a lot of firms out there and you don’t want [them all], you want the firms that are led with profitability in mind.”

Maisonneuve said she expects GDP growth in China to fall by 5 per cent next year, but that shouldn’t impact the long term benefits of investing in the country.

“[The projected fall in GDP] is the result of several things. 

“One is the base effects from the post-Covid rebound, and also the fact that China is trying to calibrate its growth towards a higher quality growth.

“The days of making a billion t-shirts [are over], as it is too carbon intensive, and they want to go up the added value chain.”

So, she said, on a long-term basis now is the time to buy Chinese stocks.

“But you need a long term horizon, because I don’t know where the bottom is going to be. What I know is that the market has come back, it’s a big market, and there are some growth prospects.”

She addressed some cultural concerns investors might have over the level of government intervention in day-to-day life, highlighted recently when tennis player Peng Shuai disappeared after posting serious accusations against a former government official.

“Although China is a communist country, it’s a very entrepreneurial country,” she said.

“[There are] many, many superior business leaders, and I think there’s actually a lot of commonality in terms of entrepreneurship and idea generation, all of that is common to leaders around the world.”

sally.hickey@ft.com